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Telia tackles legacy systems, saves SEK80 million in Q1

Allison Kirkby.jpg

Telia Company has removed more than 25% of its legacy systems, resulting in structural cost savings of SEK80 million in the first quarter, with "operational benefits" also reported.

The feat was confirmed in its Q1 financial results, which added that its digital transformation means "we can now see a reduction in incoming calls from consumers in Sweden, as we remove fault sources and pursue a channel shift towards digital".

President and CEO Allison Kirkby said: “We experienced a strong start to 2022. Our transformation towards a smarter, more digital, and more customer centric Telia delivering sustainable growth is becoming increasingly visible. Network investments combined with richer content and service orchestration is spurring growth across all business units, while improvements in how we serve our customers are reducing response times and enhancing their experience."

The financials confirmed an increase in net sales of 2.1%, reaching SEK 21.8 billion, while service revenues for the core telco business, that is excluding TV and Media, increased 2.9% on a like for like basis, while EBITDA increased by 4.6%.

Mobile service revenue grew in all business units, and CPI-linked pricing will be introduced to enterprise contracts "wherever possible to create sustainable inflationary pricing mechanisms".

The operations expense 2023 reduction target of SEK2 billion is on track, as operational expenses declined by 3% in Q1, despite inflation.

Telia said this helped all its core telco units, including Finland, to grow EBITDA in the quarter.

Operational expenses declined 3.0% driven by further business transformation progress and total net income amounted to SEK 1.086 billion.

Further, the results confirmed that the Swedish tower transaction, announced on 27 January 2022, will close in the second quarter and the net proceeds are estimated to reach SEK5.4 billion. According to today's exchange rate, it's just shy of the €526 million Telia said it expected to generate back in January, although the anticipated close date is now "earlier than previously estimated".

Pending closing of the transaction, the Board of Directors has decided to execute a share buy-back program of SEK5.4 billion, which "will further strengthen an attractive and sustainable shareholder remuneration profile", Telia Company said.

The €500 million green bond issued last month also received a mention. It is Telia Company's second green hybrid bond and on this the firm said that while terms were satisfactory "despite market volatility", the funds will "finance more energy efficient networks and green digital solutions".

Regional breakdown

Sweden delivered on its stated ambition to stay in positive growth, with service revenue growing 1.8% and EBITDA 4.4%. Both mobile and fixed service revenue grew, and customer bases were stable in both postpaid mobile and broadband. Fibre growth once again was higher than the decline in copper broadband connections, and Telia Sweden’s IPTV product saw 15% revenue growth, earning it the recognition of "star performer".

In Q1 2021, Telia Company reported that its operations in Finland had faced "significant roaming impacts", with "weaker results in ICT and professional services". As of Q1 this year, while core telco in Finland saw EBITDA growth, a turnaround for this particular market "remains an absolute priority" for 2022.

On this Telia Company elaborated: "This comes on the back of a comprehensive, long-term oriented turn-around plan encapsulating network quality, brand perception, commercial execution, cost transformation and more, aiming to enable performance in line with the market over time. While improvements are starting to show, we have more work to do and remain on track for a confirmed and sustainable turnaround in the second half of the year."

Telia Norway saw service revenue up 6.6%, led by the enterprise segment. Contract highlights over the quarter included an extension of a central framework agreement comprising 120 government agencies. In Norway, both mobile and fixed services grew at 9% and 2.5% respectively.

In Lithuania and Estonia mid-to high single digit growth was reported in both service revenue and EBITDA – 5.6% and 5.4% in Lithuania and 8% and 7.8% in Estonia respectively.

Improvements in Denmark are "gathering pace" with mobile-led service revenue growth of 3% in the quarter, up from flat in Q4, driving EBITDA growth of 5.4%.

"We aim to continue the growth trajectory by ensuring pricing reflective of our improved network quality, increased data traffic and inflation," Telia Company said.

Ukraine

Kirkby's statement also commented on Russia's invasion of Ukraine, confirming that Telia Company's markets "have proven resilient".

All markets have made a series of commitments which include: reduced rates, free access to international news, pre-paid SIMs and special offers and exemptions of some costs for Ukrainian businesses reallocating to a market that Telia Company serves. Telia Company has also made donations to humanitarian relief efforts in Ukraine.

On the crisis, Kirkby said: "While to date our markets have proven resilient to the impact from the Russian invasion of Ukraine, we are deeply concerned about the human suffering caused by the conflict and are focused on enabling our products and services to provide relief and support wherever possible…Saddened by the situation, I am inspired by the resilience of our colleagues in the Baltics and in Finland, in particular, in the face of uncertainty, and immensely proud that Telia keeps people and society connected in times like these.

She concluded: "Notwithstanding the lack of clarity on the longevity and outcome of the conflict, which we continue to monitor closely, I am emboldened by the visible signs of progress we are making in creating a better Telia for the benefits of customers, employees and stakeholders alike.”

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