Telia prioritises cash flow and mulls more asset sales

The Sweden-based operator's latest investor update on Thursday was really all about the financial side of the business. It set some fairly ambitious targets, including the aim of taking free cash flow to at least 10 billion kronor (US$990 million) by 2027, and made it clear that shareholder returns are high on its agenda.

The past couple of years have seen Telia sell off some fairly high-profile assets and pass on the proceeds to shareholders. And that's a strategy that it will continue to pursue; asset sales might be on a smaller scale than they have been to date, but they are certainly not off the table.

"When it comes to portfolio optimisation, Telia has achieved a lot in recent years," said finance chief Eric Hageman on the company's investor day webcast.

He listed "big ticket" sales, starting with the divestment of Telia Carrier just over three years ago to Swedish pension investment vehicle Polhem Infra for SEK9.45 billion (US$1.06 billion), and including the sales of Telia Denmark to Norlys for DKK6.25 billion (around $930 million) and a minority stake its towers business to Brookfield and Alecta. "All deals done at very attractive multiples and which gave us substantial proceeds which we distributed to shareholders via dividends and share repurchases," Hageman said.

"Going forward we will continue to actively pursue further portfolio optimisation," the CFO said. "When and where we feel that Telia is not the best owner of an asset, and superior value can be created from exiting, we will take decisive action."

Telia has made it clear that it is looking to make some money from the sale of its copper network real estate, something that could bring in SEK1 billion over the next couple of years. And mobile sites could also be a source of cash.

"[We will] look at everything and see where the best return is," Hageman said. "Rooftops is one of those things that we are thinking about."

Ultimately, Telia's executives were more keen to talk about its new financial targets than potential assets sales, although the two are, of course, related.

The company is shooting for 2% service revenue growth and a 4% increase in adjusted EBITDA over the 2025-2027 period, both figures being CAGRs. It wants to bring capex down to below SEK14 billion per year. And it is working on that aforementioned SEK10 billion free cash flow target; free cash flow has not been a guidance metric for Telia before, and its inclusion now sends a strong message about the way relatively new CEO Patrik Hofbauer – he took up his post in February – intends to run the company.

Hofbauer set out his stall earlier this month when he presented a so-called change programme that included 3,000 job cuts as part of a plan to save SEK2.6 billion in annual costs.

"Execution of the new strategic priorities has already started with the launch of our change program, announced on September 4, which is a big step towards decentralizing the complex structure that we have today," Hofbauer said, in a statement on Thursday.

"With the program, we aim to maximize the value of our network infrastructure and service offerings to increase customer satisfaction, sustain growth, increase efficiency and profitability, and improve our ability to serve our customers and the societies where we operate," he said.

He's ticking a lot of boxes there, particularly where investors are concerned. The industry will doubtless track his progress pretty closely over the next couple of years.