Telia’s Good Organic Growth Does Not Flow to the Bottom Line; TV the Main Drag Once Again

Narrow-moat Telia reported good organic growth of 3.2% in service revenues during the first quarter (2.9% in last quarter), with Norway and the Baltics as growth engines in the mid-single-digit range. Sweden recorded a more modest 1.8% organic growth in service revenues (1.5% last quarter), with average revenue per user, or ARPU, growing 4% year over year and stable market share in both mobile and broadband. In the Baltics, sales growth was slower than Tele2 in this same quarter (6% to 8% compared to Tele2’s double-digit growth); however, it is worth noting that Telia is more than two times larger thanks to its fixed-mobile presence, while Tele2 remains only a mobile player. In Finland, sales stabilized after several quarters of declines. We are maintaining our SEK 40 fair value estimate.