Telenor Asa Ord

Good morning and welcome to Telenor's Q4 2025 results presentation. I'm Frank Mauer, Head of Investor Relations, and our Group CFO to Bernoullis today. As previously communicated, our CEO Benedicte Schillberg-Fossmyrd is not here due to a planned surgery. And as you can see, we have a date on dividends and capital allocation. Before we get started, a few quick notes. All service revenue and EBITDA growth rates are organic, as always. When we mention EBITDA, we're referring to adjusted EBITDA. Note that this time, Tenor Pakistan has been excluded from the P&L figures that we show you today. And with that, I'll hand you over to Torbjörn.

Thank you, Frank. Now, let me start by saying that Benedicte is recovering well from her surgery and she sends her warm regards to all of you. We certainly look forward to welcoming Benedicte. I wouldn't be surprised if she has joined us online to follow this exciting results presentation. Now, what a year we have behind us. With strong operational momentum and disciplined execution across the Nordics and Asia. Our results underline some clear messages. First, we delivered a strong cue for financial performance in line with the outlook we communicated earlier in the year. Our customer-first approach and disciplined operation enabled us to deliver in the Nordics, despite the brisk competition, particularly in Finland. Our full-year free cash flow before M&A reached 12.9 billion kroners, around 13 billion outlook and financial ambitions since 2022. The free cash flow including M&A was 17.3 billion. Secondly, consistent with the strategy we outlined at our recent Capital Markets Day, we continue to simplify the Group Portfolio, reinforcing the Group's Nordic. We remain committed to long-term value creation in our remaining Asian assets. The third message today is that we propose to make the 16th and prepare for a 15 billion buyback program. And I will come back and talk more about the capital allocation and distribution later in the presentation. Ergo, right after Benedicte and I stepped into our roles, we outlined our priorities for the first year. These included strengthening customer centricity execution culture, sharpening our focus on return on capital, and delivering on our 2025 financial ambitions, including our strong commitment. One year later, I'm pleased to say this is exactly what we have done. During the year, we evolved and refreshed our strategy, which we present missions to the investment community at the CMD in November. Over the last months, we have also stepped up on execution on portfolio simplification, and the word clean exits from Pakistan and Alente, and last but not least, with the agreement to sell Telenor's ownership in True, announced on the 22nd of January. We can value creation for our shareholders, as we will be exiting Thailand at more than three times the 12 billion market value we had in DTAC at the time years ago. All in all, we are pleased with these steps to further sharpen the group's focus. Now, as mentioned, delivering on the 20... And I am happy to confirm that we delivered on all parameters. During the year, we saw solid operational performance in the Nordics, in line with the outlook provided for the EBITDA growth of 5.8% for the group, compared to the outlook of 5-6%. Note, however, that the 5.8% excludes Telenor, while our outlook included Telenor Pakistan. If Pakistan had been included in the actuals, EBITDA growth for the group would have been one percentage point higher. And, as mentioned in the highlights, free cash flow before M&A ended at $12.9 billion, in line with our guidance. Moving to the highlights for the group financials. Group service revenues reached 15.3 billion, up 2.6% year-on-year. Released 11.7% to 8.6 billion, driven by the strong performance in the Nordics, while being helped 3 percentage points by effects related to accounting adjustments and reversals. Adjusted EPS was 2.21 kroners, a material uplift from last year. Free cash flow before M&A came in at 4.33% year-on-year. The group capex-to-sales ratio was 15.5%, four percentage points lower than in the same period. The ratio was 17.2% for the quarter and 14.3% for the full year. The leverage ratio closed the year at two-target range, mainly driven by positive year-on-year effect in total free cash flow. Now, as we repeatedly stated, driving return on capital employed time remains a top priority for us. We are pleased to note that for the last 12 months, Rocky came in at 9.2%, up one percentage point. If you exclude the associated companies, the group Rocky would have been 13.6%. Then, zooming in on the top line, growth of 2.6% year over year remained constrained by macro conditions in Bangladesh. If you exclude a VAT adjustment in Norway and a revenue curve in Q4 last year, the underlying growth for the group would have been 1.8%. Our Nordic business area was the main contributor as usual. Now turning to OPEX. OPEX declined by close to 2% in Q4, helped by relentless cost focus through 5 million withholding tax reversal related to Telenor Pakistan and other group OPEX. and OPEX adjustments in the Nordics in the same quarter last year. A justly flat year over year for the group and for the Nordics. In the Nordics, OPEX in Norway increased by 3.4%, mainly caused by and transformation, as previously flagged, as well as reparation expenses following the storm Amy. Now, sales and marketing expenses also increased in the Nordics in the market early last year. Moving to Group EBITDA, which grew strongly at 11.7% in Q4. As you can see, all business areas contributed to this growth, even though the main part came from the Nordics. AMP delivered significant improvements across most of its businesses and EBITDA growth. EBITDA contracted in Asia. However, this was due to timing of internal cost allocations between the Asia headquarters and the Telenor. Regarding the reporting segment called Other, which mainly consists of our corporate functions, in Q4-24, a retroactive true-up was made for internal segment, while in 25, these charges were more evenly spread out through the year. On the chart to the right, we have visualized this effect. As you can imagine from these timing effects, offsets the similarly positive year-over-year effect in the other segment. Finally, excluding this effect, the other segment year-over-year, largely explained by external revenues in Telenor Procurement Company, which tends to vary significantly between quarters. Both contribution from group eliminations was due to the mentioned 75 million reversal. Now, clearly, 11.7% is a significant number. In this regard, note that 3.2 percentage points is a result of the mentioned effects I talked about earlier. It would have been 8.5%. Then, turning to revenues in the Nordics. The Nordics continued to deliver top-line growth. In the quarter, we reported 2.8% organic growth, driven by our more-for-more strategy. Adjusted for the reversal effects I mentioned pertaining to Q4 last year, this percent. Norway was the largest contributor, but we did see solid execution and solid contribution from across our Nordic markets. We grew 4%, driven by ARPU uplift across all markets, in addition to customer growth in Sweden. Fixed service revenues grew only marginally, with them being offset by active base management with focus on profitability in Sweden, as we've talked about in previous quarters. Across markets, churn can so expect a significantly sharpened price competition in Finland. We nevertheless added 59,000 new postpaid customers in Sweden and Denmark, of about 24,000 postpaid subscribers, leave us in Norway and Finland amid high promotional seasonality. I'll go into some more detail. Norway remained the strongest contributor at 2.9% growth, underpinned by healthy ARPU trends with fibrous broadband. In Sweden, mobile service revenues rose 4.5%, offsetting a 5% managed decline in fixed service revenues, as talked about. Net ads of 45,000 in Sweden, helped by a successful black month with strong traction in 5G broadband, by 3.6%. A new development is that all Danish operators have increased list prices over the last months. Still, the market remained highly promotional. In the Finnish market, we saw a more visible presence of the new MVNO, as well as deep promotional discounts led by one of the network operators. As well, amid elevated market churn, the price level on incoming subscriptions was significantly dilutive compared to DNA's backbook ARPU. I'll serve as revenues by 4.3%, driven by upselling, solid commercial execution, and a larger mobile subscriber base compared to last year. May kept its post-paid smartphone base steady during the quarter, as the negative net ads were driven by a prepaid cleanup and some decline in mobile broadband. Totals 9%. Overall, Nordic's 2.8% service revenue growth reflects continued strong performance strategy, despite broadly pronounced seasonality and increased competition in Finland. Now, moving to EBITDA. EBIT 8.7% for the quarter. Gross profit was up more than 4%, supported by upselling, pricing, product mix, wholesale revenue. Ongoing transformation programs help reduce OPEX by 0.7%, despite higher commercial activities and increased spending on robust... Yet again, Norway remained our top contributor with 9.3% EBITDA growth, helped by the VAT reversals in the same quarter last year. In addition from the national roaming agreement, and adjusted for these factors, EBITDA growth would have been about 3% in Norway. In Sweden, the continuation transformation had a positive impact on gross profit, which grew 3.4%, contributing to the 11% growth in EBITDA. From the service transformation efforts, this brought EBITDA to the 40% margin, which is a milestone for Telenor Sweden, which just surpassed the income basis. Even when excluding the VAT-related reversal last year, EBITDA growth was still rock solid at 7.6%, continued to execute commercially while relentlessly tweaking costs, leading to an EBITDA growth of 5.8%. The small OPEX increase was mainly due tail. DNA both grew its top line while cutting back on costs, resulting in a 6.6% organic growth in adjusted EBITDA, visiting market conditions just described in Finland. Now, in summary, we are pleased with the continued strong execution in the Nordics. Now then, let's move over to Asia. Before enjoying the fireworks on New Year's Eve, we close the sale of Telenor Pakistan, which is now out of the book. Sequence, our Asia revenues and EBITDA, as charted on the left side of this slide, are nominal NOKI amounts that only reflect Grameenphone in addition to the cost of retail. GrameenFund delivered organic service revenue growth of 3.4% in the quarter, but as you can see, the NOKI amounts came down due to a weakening of the Bangladeshi Taka. Note that when adding back the accounting corrections last year, GrameenFund revenues and EBITDA were basically flat year-over-year in the spending environment and continued tough price competition on data. Grameenphone was just recently awarded important spectrum resources in this reserve price, which will be key to improve indoor and outdoor coverage for our customers going forward. As for the associated companies, the main of the true exit, which will be a two-stage deal, as mentioned earlier. This transaction is a major value creation milestone for Telenor, as it concludes in Thailand. Benedicte and I would like to thank both current and previous employees that have contributed a big part of their lives to this fantastic. Note that we expect to close the first sale of the first tranche before True will pay its Q4. Cellcom Digi managed to improve commercial execution in its third quarter, swinging back to top-line growth. While Q3 EBITDA declared debt, the company paid out a stable dividend in Q4. We continue to work with partners to support CellcomDigi in strengthening its association, whose financial situation was, as described in their own report, distressed. Our goal is to ensure a setup with more efficient use of specassets to the benefit of customer and society in Malaysia. D&B is expected to secure an additional 100 MHz of key MIS planned exiting Q226, which would be a helpful step for the company. Now finally, we have noted a lot of assets in the wake of the recent announcement of the sale of True. As such, let me be clear. As an active owner, Telenor is a committed position in both Grameenphone and Cellcom Digi. And the sale of True should not be interpreted as signaling any imminent or near-term plans to sell or other. Now then let's turn to AMP, which delivered a strong quarter. At our recent CMD, we presented in AMP. Part of that is to develop companies close to core within security and IoT. And we saw meaningful progress in several business. Highlight two here. Firstly, KNL made a strong contribution on both revenues and EBITDA. Now, KNL offers mission-critical services, software-based and ultra-secure tactical defense communication solutions for use over long distances. Crucial to this progress were deliveries on contractional defense forces announced earlier in the year. This is a truly scalable business with telco margins, but far higher growth, and we look forward to see. Secondly, the largest connection, the largest single contributor to AMS EBITDA and cash flow on a yearly basis. This company is the number 10 globally within managed IoT connectivity. In Q4, Connection delivered 9% organic revenue growth, achieving 24% year-over-year growth in its global SIM base. EBITDA in Connection was however affected negatively as FX and OPEX growth. Overall, we are pleased with the development of the AMP portfolio, which is seeing continued value uplift from a net asset value perspective. Further details can be found on our website. Then, moving on to the profit and loss highlights for the group. We're pleased to report that SAW and net profit from associated companies drove adjusted EPS to an 89% increase in the fourth quarter, while Glent for the full year 25. In terms of special items and notable swing factors this quarter, other income and expenses was higher than last year equipment, as well as workforce reductions. The half a billion fourth quarter fluctuation in net financial items was due to fair value changes related to truth. There was a $3 billion loss on the discontinued line in addition to a $0.4 billion tax expense in conjunction with the divestment of television. Next, let me walk you through the main variables behind our free cash flow before M&A of $4.1 billion in the fourth quarter. 8.6 billion. We need to add back the discontinued contribution from Pakistan of half a billion, since this was part of our cash flow in the quarter. We had a solid contribution from working capital, including about 900 million from the use of handset financing. We received 1.3 billion in dividends from associates, which amounted to 2.9 billion, of which 2.2 billion came from the Nordics. Telenor Sweden made a schedule 3 on its share of the multiband spectrum license 1 in 23, bringing the total spectrum spend for the group to half a billion in Q4. On the M&A side, 4.6 billion for the sale of Telenor Pakistan, along with 0.6 billion for the sale of Alente, on top of the pre-closing dividend the company paid. And this is 0.1 billion this quarter. Now, then let us take a look at our leverage ratio. Our leverage ratio evident in our target band of 1.8 to 2.3. The net debt reduction happened despite a 1 billion increase due to a knocky weakening during the quarter and related to the second tranche of our dividend paid out in 25. Which was now more than a free cash flow in the quarter and the deconsolidation of 1.8 billion in net debt relating to Tel Anor Pakistan. Then let me... Telenor has a 16-year track record on delivering on our dividend policy of year-on-year growth in ordinary dividends per share through divestitures in the same period. The group has changed over time, as you know. Over time, this ordinary dividend has been complemented by extraordinary dividends. As you may recall, we reconfirmed our strong commitment to our dividend policy at our CMD in November. adding another year proposed a dividend for 25 of 9.7 kroners per share for approval at the upcoming AGM, with payments happening in June and October. Now then, let me move on to the use of proceeds from True once the transaction has been completed. At the recent CMD, we explained and our return mindset as part of the value creation engine of Telenor. How we distribute capital back to shareholders is a very important part of our capital allocation. We need to ensure that we are effective and targeted in how we allocate capital to the best projects to create and compound value over time for the capital employed. This includes organic reinvestments but also value accretive inorganic investments that help us strengthen our customer proposition further scale and efficiencies. We are now preparing to allocate the first 32 billion proceeds to be received from the first grant in true. And we plan the following use of proceeds. 15 billion will be allocated to a share buyback program, and I'll give you more details on that in a minute. Allocated to repayment of the 1 billion euro bond which matures now in May. and 6 billion will be allocated to finance the closing of our region consumer fibre division, likely due in the second quarter. The remaining 7 billion to be received from the years, we will deal with the use of proceeds at that point in time. We will be retaining some extra financial flexibility near term to consider the further value creating acquisitions in the opportunities that offers attractive long-term return on capital by driving customer reach and satisfaction scale and efficiencies. Now to the extent that sufficient materials materialize, we will of course consider further return on capital to shareholders to ensure balance sheet efficiency while protecting our credit rating. About the buybacks. The board has stated its intention to initiate a share purchase program over three years once the first sale of shares. The buybacks are to be confirmed each year by the AGM. The objective is to support per share value accretion and dividend coverage by reducing... As in the past, our stock exchange repurchases will be executed by a broker on an arm's length basis and will be made in full compliance with... The exact time to completion may therefore depend a little bit on the liquidity of our shares on the Oslo Stock Exchange. As usual, the Norwegian with its proportional share of ownership in line with historical practice. So then if I move on to the financial outlook. Financial outlook is in line with our indications at the capital markets day. Our mid- and long-term ambitions remain unchanged and are shown here only for Q26. We expect a low single-digit growth in service revenues in the Nordic. As for Nordic's EBITDA, we see mid-single-digit growth while we fork leases of around 14% in the Nordics. Please note that we do foresee quite significant variations between quarters in Q26. Part of the year, in Q2, the Nordics is facing a particularly tough comparable period. Firstly, we benefited from particularly favorable timing of that year. Secondly, the year-on-year uplift from the national roaming contract in Norway will be lapped in mid-March. We had around 550 million in NASH 5, which was more than originally expected. We have said we would expect these wholesale revenues to start fading during 26 and particularly in 27. Petitors, this remains our view. Our best estimate is currently that these revenues will be around the same level in 26 as last year, although quite low if at all. I might add on this that in terms of the financial ambitions for 28 and 30, there are no national roaming revenues. Hoping for a gradual macro upswing following the February elections, but we find it prudent to have modest expectations. For the group, we anticipate to mid single digits. A key sensitivity for the outcome will be the shape and strength of a potential macro recovery in Bangladesh. Finals before M&A excluding dividends from associates and incremental spectrum to come in at between 10 and 11 billion. We expect to see a somewhat basics similar to 25. All in all, outlook for the current year reaffirms our overall... To conclude, in 2025 we delivered on our financial ambitions. We are executing on the strategy of excellence, efficiency through transformation, and overall simplification, including becoming more of a Nordic-centric group over time. Our long-standing commitment to capital distribution to our shareholders. With this, I would like to hand the word back to Frank. Thank you.

Good present through then to the analyst Q&A. And as usual, please limit yourself to only one question. And if needed, a quick related chance to ask their question as well. So, operator, please go ahead.

Thank you. At this time, we invite those analysts wishing to ask can be found at the bottom of your screen. When it is your turn, you will receive a prompt to be promoted as a panelist. Please accept, wait a moment, and once you've been introduced, you may ask your question. As a reminder, we are allowing analysts one question and one related follow-up today to form. Our first question will come from Sofia Rakicevic with Goldman Sachs. Please unmute your line for your question.

Hi, good morning, everyone. Just one question for me, and that is, what potential headwinds are you factoring in your medium, given that underlying 2025 growth for this year is around 5% and a bit more than that if we exclude IS and one-offs, and you're guiding for mid-single DIVX? So what do you expect to deteriorate on an underlying basis over the medium term? Thank you.

As far as our outlook is concerned, the market will continue to be competitive as it has been in all our Nordic markets. And we expect this to continue. Of course, do what we can to strengthen our competitive position with our leading network position in Norway and a strong network position in the other areas to ensure this. So we don't have any particular headwinds over and above the normal competitive behavior. Competition has always been tough and will continue to be tough. Our normal assumptions that we have into our overall ambitions going forward. So in terms of the force, we have been clear that there will be step-ups on sales and marketing spend to ensure that we defend our time. We will continue to push forward on our strong transformation program as we have over many years to offset these effects. So, you know, that gives us comfort that, you know, the forecast for 26 in terms of our Nordic expectations deliver on well.

Thank you. That comes from Andre Kabacek with UBS. Please unmute your line, turn your video on and ask your question.

Hi, for the presentation and let me join you in wishing Benedicta speedy recovery if indeed she is listening. I just wanted to follow up on location opportunities in the Nordics as a key focus area for you going forward. And I just wanted to understand from, you know, where we are standing today, what in your view are preventing you from moving ahead and when do you expect these to be cleared?

So which hurdles are you referring to then, André?

So some of the early hurdles, I guess, when you're looking at the capital allocation opportunities in the Nordics, which you mentioned, which Benedicte mentioned in the summer, etc.

Yeah, no, look, we comment on specifics, but clearly, you know, we've been very clear at the Capital Markets Day that we see ourselves becoming over time. That means, of course, that we will be looking at value accretive opportunities that will help strengthen our footprint in this region. And, you know, the LUTO will of course depend on whichever transaction would be considered. What is key for us is to ensure that value accretive will strengthen our customer offering, ensure that we get scale and efficiencies that will help drive return on capital employed. And we will of course, as we do in any particular deal, to ensure that we maximize the chance of success for whatever we decide to pursue. But if we don't find it in my presentation, of course, consider further returns of capital to shareholders.

Thank you. And if I may follow up on this. So, obviously, we've had the development in Norway with Challenger Ice, which you are now hosting. Is this something that is placing a bit more urgency on you to kind of do –

Not this deal in and of itself, you know, just a couple of comments on on this one You know, we are of course used to network cooperation and we have that as we as I mentioned in my presentation the You know the the the revenue effect, you know, we do expect revenues from this agreement to be similar to and taper off We don't have any NRAs into into the future plan. I think what I What this deal really brings away is the only market that we remain regulated in. We believe it's long overdue that this regulation is removed with the creation of a strong second network. So our strong message to the authorities will be now is the time to take future. As far as them pulling together their network assets or in whichever structural form they do it, I had competition here for a long time. We are the leading network in Norway, both on scale, coverage, quality. And we will, of course, continue to defend, invest in services, whether it be cyber or entertainment, in order to reinforce the strong customer relationship and the market position we have here in this wonderful country. Okay.

Thank you very much.

Our next question comes from Christopher Bjornsson with DMV Carnegie. Please unmute your audio and on your video and go ahead with your question.

Good morning.

Great. Yes, thanks for letting me on and congrats on all the exciting news for the last period. I just wanted to kind of follow up on the kind of trying to ask the question without asking the question. But given that I would expect it's fair to assume that they're a decent customer, both Lisa and Taylor business. Can you maybe help us understand a bit like what the exposure is there? Are there significant overlaps where they could? I think I saw on the local at Kenowa that the external revenues was about 650 million NOC in 2024. So just trying to gauge in the longer term for that 2030 target of 14 to 15, what kind of effects could be there in like a base and a bear case scenario or yeah.

Yeah, all our towers, you know, raise the tenancy ratio, which of course is other operators using our infrastructure. As far as, you know, if there should be from the recently announced agreement between our two competitors, You know, we estimate that we have about 120 to 160 million impact from 2027, which is about 4 to 5% of the tower's revenue. You know, I think, so it's not something that we deem substantial, the emergency network, et cetera, that is on our infrastructure. So it's about 4 to 5 percent or 120 to 160 million. And we don't anticipate that to hit. I would like to add that, you know, using infrastructure, co-locating on towers is, of course, you know, a capital effective way to remove this 120 to 170 million remains to be seen.

You know, mind you, that's due to the overlap collocation of the towers between the two parties.

Right. That's helpful. Thank you very much. And then just final to follow up on the Bangladesh you mentioned and so on. Still there are material parts of the portfolio coming up for like renewal or expiry later this year. Can you give any indications of how confident you are that auctions and whatever later it could end up being?

I don't have any new information on that. These will be renewals and I'm sure that there will be an orderly, probably the 700 auction and the result of that. And so we'll deal with the renewals when the time comes. All right.

Our next question comes from Felix Henriksen with Nordea. Please unmute your line, turn your audio on and ask your question.

Yes, hope you can hear me. Thanks for letting me on. The question is on Finland, where you saw tough competition in Q4. The market, they've seen some easing in the environment in January with one of the MVNOs becoming a bit more passive and also the market leader raising prices also. Do you sort of agree with this and have you seen easing in the competitive environment in Finland into Q1? Thanks.

Yeah, we see the same of what's happening in the Finnish market. It was in a very competitive December, but that seems to have into January.

Okay, fair enough. And then if I may, just with a quick follow-up, the Bangladesh capex in Q4 was still quite low. I think you commented that you plan to ramp that up a bit into 2026. So can you sort of probably have anything to share about the expectations regarding the spectrum renewals in Bangladesh as well? Thank you.

As I think I've covered, the spectrum renewal in Kosovo is concerned. We've been very clear that Bangladesh is a country where there is a voice to data transition going on. We have, of course, now secured critical for excellent indoor and outdoor coverage of data in the country. So that will, of course, entail some catbags. You know, we have an economic situation in the country. We have been very... prudent in how we release CapEx into the country so that we're not pushing when the market environment is very muted.