Telenor Asa S/Adr

Good morning, and welcome to Telenor's first quarter results presentation for 2026. Joining me today are our CEO, Benedicte Schildberg-Sassmann, and our CFO, Torbjörn Wist. Before we start, a quick reminder. Unless we state otherwise, all revenue and EBITDA growth rates are organic and on a constant currency basis. And EBITDA refers to adjusted EBITDA. Today's agenda will follow our usual structure, and at the end of the presentation, we'll open the line for Q&A. To give everyone a chance, we kindly ask each of you to limit yourself to one question. And with that, Benedicte, over to you.

Thank you so much, Frank, and good morning, everyone. In the first quarter, Telenor continued to execute on its strategy and deliver steady performance despite challenging external backdrops. The closure of the Strait of Hormuz pushed up consumer energy prices and created a new supply chain uncertainty, particularly across parts of Asia, including Bangladesh. We delivered service revenue growth of 1.6% and EBITDA growth of 3.1%. Free cash flow before M&A was 2.1 billion, a solid start to the year on cash generation. We also progressed well on our portfolio simplification, supporting our strategy to become a more Nordic-centric company over time. After divesting Tel Anor Pakistan at the end of 2025, we completed the sale of the 25% stake in True Corporation in March, receiving $30 billion in proceeds. The remaining 5% stake in True will be sold within two years. including the three proceeds, total free cash flow amounted to $32 billion in the quarter. Following these simplification milestones, we have a strong financial position. Leverage is at 1.2x, and we plan to commence our three-year $15 billion share buyback program after the AGM. In the Nordics, competition is still intense. but it has eased somewhat compared with the pressure we saw building through 2025. Mobile service revenue growth was around 3% when adjusted for business transfers. Fixed service revenues rose by 1% year over year. In March, we launched Sikre in Norway, an innovative security-integrated subscription. This is a good example of the services first strategy represented at the CND. In Asia, Bangladesh remains challenging. Energy supply vulnerabilities and cost of living pressure continue to outweigh the positive effects of the February election. And Grameen Fern returned to negative growth due to affordability pressure and tough data competitions. However, we remain confident in our medium and long-term ambitions as we invest in transformation and simplification to build an even stronger future-fit Telenor. However, we are lowering our EBITDA growth outlook for 2026 due to the top-line headwinds in Bangladesh and Finland and because of the effects of the transfer of managed IoT and coastal radio in the Nordics. Torbjörn will explain that in more detail. Turning to the Nordics. Growth has softened compared with the strong momentum we saw in 2025. In Q1, Nordic mobile service revenues grew by 2%, or close to 3%, excluding the internal transfer of the managed IoT business to Telenor Connection. Fixed service revenues grew 1%, supported by fiber growth in Norway. EBITDA in the Nordics grew 3.8% driven by service revenue growth and higher wholesale revenues in Norway. And we continue to see cost benefits from transformation, most notably within customer service and due to closure of legacy networks in Sweden. And in line with what we said at the C&D, 2026 is and will be a peak year for implementation costs of transformation initiatives. Overall, OpEx increased 2%. Nordics had higher amortization of sales commissions and continued high activities in transformation projects, particularly in Norway. And the higher sales costs reflected churn increase we saw last year. Encouragingly, in Q1, we were able to bring churn back towards a more normal level across most markets and segments. And we are so proud because OpenSignal's latest user experience measurements recognized all our Nordic business units for top performing mobile networks, underlying the value of our continued investment in network quality. This slide summarizes market-by-market performance across the Nordics. Starting with Norway, where we continue to execute on our now very well-established commercial strategy with more for more and services first. Value-added services within entertainment and security are key elements of this, and standalone value-added services revenue in Norway grew 8% in the quarter. ARPU increased and EBITDA grew strongly, supported by higher wholesale revenues and easier year-on-year comparisons, following last year's 100 million TV VAT charge. And while B2C campaigning held the mobile ARPU uplift back somewhat in Q1, we are encouraged to see a positive shift in B2B as we work to turn around the previous negative trend. The Norwegian Competition Authority is reviewing our latest remedy proposal on the deal with Global Connect, and we expect to be able to close the deal within the next four to six months. In Sweden, mobile continues to grow, supporting profitability despite a managed decline in low margin fixed revenue. Denmark. sustained customer momentum, particularly in fixed wireless access, while EBITDA was pressured by introductory offers and higher third-party commission costs. Overall, Denmark is executing in line with our plan, and they are in the middle of a very ambitious transformation. So we expect a clear pickup in EBITDA growth over the coming quarters. Moving to Finland, where mobile competition eased somewhat in Q1, and DNA delivered underlying mobile service revenue growth of 2.2%, while competition in the fixed segment intensified. Churn normalized, and we saw gradual improvement in new sales output. However, the pricing impact from Q4 still held back reported service revenues. And even though pricing is gradually improving, volumes have been softer, and prices on new sales renewals are still not back to the levels we saw in the first half of last year. In some cases, there is also a lag between sales and when revenue is recognized, so improvements may take time to show up in the reported numbers. As such, we believe it will take a couple of quarters before Finland returns to the mobile service revenue growth level we are aiming for, even with a continued gradual recovery. So, turning on to Asia. In Q1, we reached a major milestone by completing the sale of our stake in True, receiving $30 billion in cash proceeds from the first tranche. At the same time, the region is being affected by the fallout from the Iran war. And unfortunately, Bangladesh is among the most exposed markets, given its import dependency, limited LNG storage for power generation, and the risk for further pressure on energy costs. Marine phone service revenues declined 2% in 2001, while EBITDA was down 1.5%. The quarter also reflects the continued shift from voice to data alongside intense price competition. Year in year, the decline was driven by weaker macro backdrops, which intensified in March as customers were affected by shortages, saving measures, and energy prices. We are mitigating some of the top-line pressure through cost measures, and while we remain focused on supporting customers, we are keeping spending highly disciplined in this environment. In Malaysia, Telkom Digi showed continued top-line progress in its most recently reported quarter, and we received stable dividends. Importantly, new 5G spectrum is underway for the company's network JV, D&B, and we believe it's key to the improvement of the longer-term financial prospects of D&B. We also recognized an impairment of the recorded value of our shares in Cellcom Digi after the market value fell significantly below our carrying value. And with that, I'll hand over to Torbjörn to walk you through the financials in more detail.

Thank you, Benedicte, and good morning, everyone. Let me kick it off by taking you through the group financial highlights for the first quarter. Overall, service revenues came in at 14.8 billion, and EBITDA was 8 billion kroners. Service revenues grew 1.6%, while EBITDA grew 3.1%, resulting in an EBITDA margin of 44.2% based on the total revenues of 18.2%. Free cash flow before M&A in the quarter was 2.1 billion, and if you include the true proceeds, total free cash flow was roughly 32 billion kroners in the first quarter. Net income was 3 billion and EPS was 2.22 kroners, both up 15% year on year. Note that most of our operating currencies weakened materially against the NOKI during the quarter. In nominal terms, FX reduced reported service revenues, EBITDA and free cash flow by some 0.4 billion, 0.3 billion and 0.2 billion respectively. The group's capex to sales was 12.5% in the quarter. The leverage ratio strengthened materially to 1.2 times, driven by the disposal of our stake in True. On the other hand, Group Rocky was negatively impacted by the impairment of our stake in Cellcom Digi. While the True transaction improved leverage, the accounting gain in that sale is not included in Return on Capital Employed, because True is no longer an associated company. The Cellcom Digi impairment, however, reduces Return on Capital Employed. Importantly, Return on Capital Employed, excluding associated companies, was 13.6%, demonstrating a strong underlying result for our controlled assets. Finally, please note that we have changed the calculation of capital employed in our rocky definition. In essence, we have moved from defining capital employed as equity plus net interest-bearing debt, including license obligations, to non-current assets plus working capital. This makes the definition of capital employed a more influenceable management metric in measuring business unit performance. This is very important because, as you may remember, Benedicte and I highlighted the importance of implementing Rocky throughout the organization, and the new definition is better suited for that. Now, starting with the top line. In reported terms, service revenues were down year on year due to FX, while growing 1.6% organically. This growth was primarily driven by mobile in Norway, Sweden and Denmark. In the Nordics, mobile service revenues increased 2.7% when adjusted for the transfer of the IoT business, supported by the ARPU uplift across Scandinavia. Finland was impacted by carryover effects from lower campaign prices in Q4 last year, and front book pricing in Q1 was still below the level we saw a year ago. On fixed, service revenues grew 1.3%, driven by a larger fiber subscriber base in Norway. Asia was, as Benedicte highlighted, the main drag on growth, driven by the weekly performance in Grameenphone. Turning to OpEx, which came in at 6.2 billion, down 2.4% year-on-year in reported terms, and up 0.5% organically. Higher personnel costs and higher amortization of external retail commissions from prior periods were partly offset by lower O&M costs. This was achieved despite significant implementation costs for transformation and robustification, which we went through in detail at our CMD in November. In 2025, these costs were more back-end loaded than we expect the profile to be this year. Transformation continues to deliver cost benefits in the Nordics, as highlighted by Benedicte, and in Bangladesh, cost measures also helped mitigate the top-line decline. Then, moving to EBITDA, which was just above 8 billion, roughly flat in reported terms, but up 3.1% organically. The Nordics delivered 3.8% growth in EBITDA, driven by ARPA growth in Norway and continued fixed transformation benefits in Sweden. After the improvement in the second half of 2025, Grameenphone unfortunately declined again. As a result, EBITDA for Asia was down 1.7%, weighing on the group results. Now then, let's zoom in on the profitability in the Nordics. EBITDA in the Nordics increased 3.8% or 4.9%, excluding the impact of the transfer of managed IoT and coastal radio. Norway and Sweden were the strongest contributors, and Norway also benefited from easier comps in Q1 last year, including the VAT-related item and the limited national roaming revenue contribution in the prior year quarter. Denmark and Finland contributed negatively, reflecting the commercial and cost dynamics we discussed earlier. Denmark stands out at minus 13%, and this mainly reflects introductory offers that weighed on gross margins, combined with higher amortization of commissions from previous periods following a shortened amortization period. Overall, Denmark is executing in line with our plan, and we do expect EBITDA growth to pick up meaningfully over the coming periods. Now, then moving to Asia and focusing on Grameenphone. As Benedicte highlighted, growth turned negative in the quarter, consistent with what the company communicated to the market in March. The quarter reflects the tough macro environment, election-related restrictions and a lower-than-normal uplift from the Eid festive season. Higher fuel and gas costs have added to cost of living pressure in the country. That increases price sensitivity when customers shop for data packages at a time when competition remains intense. Tight cost control and a one-off settlement with the supplier contained EBITDA decline to 1.5% in Q1, somewhat better than previously announced by Greenphone. Now, in this environment, we remain focused on tight cost control and disciplined release of investments today. Now, then let's move to the P&L and cash flow. In the P&L, there were several material movements on the associated companies line this quarter. Operating profit was broadly flat in nominal terms, held back by FX. We booked a net gain of 12.2 billion from the disposal of our shares in two corporations. But on the other hand, we also recognized an impairment of 8 billion related to Cellcom Digi, as its market value at quarter end was significantly below the carrying amount in our books. Net financial items were positive at 549 million. This was driven by net currency gains of just over a billion, mainly related to derivatives hedging the FX conversion of the true proceeds, as well as improved liquidity and lower interest rates. Tax expense was 1.1 billion, corresponding to an effective tax rate of 12%. Net income to equity holders was 8.2 billion. Adjusted net income, excluding the associated companies, FX impacts and other smaller items, was 3 billion, corresponding to an adjusted EPS of 2.22 kroners. Then, turning to cash flow. Total free cash flow was roughly 32 billion kroners, including cash proceeds from M&A activities of roughly 30 billion kroners. The sale of our 25% stake in True, which was the first tranche, generated cash proceeds of 29.8 billion, excluding the hedging effect mentioned earlier. The related positive cash impact of 0.6 billion was offset by the first installment of 0.6 billion for residual obligations in India. Free cash flow before M&A was 2.1 billion. The year-on-year reduction in free cash flow before M&A was 0.8 billion and was mainly due to timing effects last year and the divestment of Telenor Pakistan. In addition, FX reduced free cash flow by some 0.2 billion in the first quarter. The first quarter of 2025 benefited from working capital inflows, driven by Grameen Fund due to the Eid season timing, as well as handset financing in the Nordics. Q1 last year also included 352 million of cash flow from Pakistan, most of that entity's full-year contribution, which is no longer part of the portfolio. The main contributors to free cash flow before M&A were the Nordics at just shy of 1.8 billion and ASA just over 1 billion, the latter supported by 342 million in dividends from Celcom Digi. The quarter was also relatively heavy on spectrum payments, with 0.7 billion paid, including incremental right-of-use prepayments related to the recent awards in Sweden and Bangladesh. Overall, it was a solid quarter for free cash flow before M&A, keeping us on track versus our full-year outlook, and of course a very strong quarter in terms of M&A cash flow. Now, this, of course, has clear implications for the leverage and capital allocation going forward, in line with how we outlined the use of proceeds on our Q4 call. We can now see the true proceeds impact on the balance sheet. Leverage ended the quarter at 1.2 times, well below our target range, and net debt declined to 46.2 billion. This creates headroom for incremental shareholder returns, such as our proposed buyback and disciplined value-accretive investments in our Nordic core markets. Over the 15 billion program, we will propose to start with up to 6 billion in the first year, which includes the government's portion, subject to AGM approval and available liquidity. And again, if value-accretive investment opportunities do not materialize, we will consider further return to shareholders. And that brings us to the 2026 outlook. On our full-year guidance, we have updated the 2026 EBITDA outlook for the Nordics and for the group. For Telenor Nordics, we still expect low single-digit service revenue growth and around 14% capex-to-sale excluding leases. We now expect low to mid-single digit EBITDA growth, updated from mid-single digit. The main reasons are the somewhat slow market normalization in Finland and that we have chosen to not adjust for the impact of the business transfer of managed IoT and coastal radio from the 1st of January, which we had assumed in Q4 when we made the original guidance. As stated in the Q4 report, these transfers reduce EBITDA by around 0.2 billion for the year, equivalent to about one percentage point of growth for Nordics. For the group, we now guide flat to low single-digit EBITDA growth, updated from low to mid single-digit. In addition to what I just mentioned, the key driver is the impact of the unresolved situation in the Persian Gulf and what effect that is having on Bangladesh. While everyone hopes for a quick resolution to the conflict, Bangladesh is a vulnerable economy and the exposure increases the longer this situation persists. That said, several factors help protect the flow through to free cash flow from EBITDA sensitivity in Grameen phone. Key shields, I remind you, are the 44% minority ownership and the 40% corporate taxes and of course our own operational measures in the company. We maintain our free cash flow guidance of 10 to 11 billion before M&A and incremental spectrum commitments post-CMD, excluding dividends from associates, despite a negative FX impact of around 0.4 billion from the stronger knock-in. On the quarter-by-quarter profile in 26, please note that Q2 will be particularly challenging for EBITDA growth due to a difficult comp given the standout second quarter last year in the Nordics, lapping of the Norwegian roaming agreement from mid-March, a smaller year-on-year impact from already implemented backbrook price migrations, continued high transformation activity in the Nordics in the first part of the year, and bigger impact of energy shortages and related inflation in Bangladesh. And while 25 had a back-end loaded cost profile for both sales and marketing and transformation costs, we expect a more even distribution throughout 2026. For Grameenphone, we expect service revenue growth to remain negative in the near term. The timing of recovery remains uncertain, given the indirect exposure to the Iran war. And then finally, just to point out our medium and long-term financial ambitions, they remain unchanged. And with that, Benedicte, I'll hand it back to you for the wrap-up.