Company Reports

Narrow-moat Telenor reported service revenue of NOK 15.8 billion in the first quarter, which represents a 5.6% organic increase year over year. The increase in service revenue was driven by mobile service revenue growth in the Nordics, thanks to average revenue per user increases in all markets except Denmark. In Denmark, the improvement came from an increase in the subscriber base. We continue to believe Telenor can gradually increase prices without losing significant market share, especially in Norway, where it is the incumbent with a very high market share. In Asia, organic service revenue increased by 6%, primarily attributed to positive development in data usage and an increase in data users in Grameenphone. EBITDA was NOK 8.5 billion or a 43.7% margin, up 6.9% year over year on an organic basis and slightly above our 2024 EBITDA margin estimate of 43%. Telenor is well positioned to reach its 2024 financial ambitions of low- to mid-single-digit growth in service revenue and mid-single-digit growth in EBITDA. We maintain our NOK 130 fair value estimate.

Telenor is the incumbent telecom operator in Norway and operates in Nordic and Asian countries. Its business is mature and growing slowly with high reliance on mobile operations, but it generates significant free cash flow and has increased dividends nicely in recent years. Telenor expanded into emerging markets earlier than many European telecom operators.

Narrow-moat Telenor reported service revenue of NOK 16.1 billion in fourth-quarter 2023, a 4.9% organic increase year over year, in line with expectations. The service revenue increase was driven by mobile price increases in all markets, except Denmark, and mobile subscriber growth in all markets, except Norway. We continue to believe Telenor can increase prices without losing subscribers, especially in Norway, where it is the incumbent with a very high market share. In Asia, service revenue increased 7%, largely due to increased data usage and price adjustments in Grameenphone and Pakistan. EBITDA grew 3.9% on an organic basis to NOK 8.5 billion, but saw a slight margin decline to a 40.4% margin from 40.9% a year ago.

Telenor is the incumbent telecom operator in Norway and operates in Nordic and Asian countries. Its business is mature and growing slowly with high reliance on mobile operations, but it generates significant free cash flow and has grown dividends nicely in recent years. Telenor expanded into emerging markets earlier than many European telecom operators.

Narrow-moat Telenor reported service revenue of NOK 15.8 billion in the third quarter, a 4% organic increase year over year, outperforming expectations. The service revenue increase was driven by price increases in all markets except Denmark and subscriber growth in all markets except Norway. We believe Telenor has capacity to increase prices without losing subscribers, especially in Norway, where it is the incumbent with very high market share. In the Asian market, service revenue increased 3%, primarily attributed to increased data usage and price adjustments in Grameenphone. EBITDA increased 1.5% on an organic basis to NOK 9.3 billion but saw margins decline to 46.0% margin from 47.5% a year ago. Telenor provided additional clarity on its 2023 outlook. Nordic Service revenue and EBITDA are expected to be above 3% from an original forecast of low to midsingle digits. Group capital expenditures for the quarter fell to NOK 2.7 billion compared with last quarter’s NOK 3.4 billion. Management also confirmed capital expenditures will be 17% of sales in 2023. We are maintaining our NOK 130 fair value estimate.

Narrow-moat Telenor reported service revenue of NOK 15.8 billion in the second quarter, which represented a 4% organic increase year over year. The increase in service revenue was driven by mobile service revenue growth in the Nordics, thanks to price adjustments and larger subscriber bases in Sweden and Finland. In the Asian market, service revenue increased 5%, primarily attributed to increased data usage and price adjustments in Grameenphone. EBITDA came in at NOK 8.8 billion or a 55.7% margin, up 4% year over year on an organic basis, thanks to service revenue growth and energy costs remaining stable compared with the previous year. The increase in personnel expenses grew less than inflation, according to management. Telenor is well positioned to reach its 2023 financial ambitions of low- to mid-single-digit growth in service revenue and EBITDA. We are maintaining our NOK 130 fair value estimate.

Telenor’s fourth quarter was in line with company-provided consensus expectations, recording 1.9% organic growth in revenue and flat EBITDA year over year. For 2023, Telenor is expecting revenue and EBITDA growth in the low- to mid-single-digit range in the Nordics, an acceleration compared with 2022 and in line with its medium-term targets. Telenor has been increasing prices across all its Nordic markets in both mobile and broadband plans to compensate for higher inflation costs. This resulted in mobile service revenue growth of 5% in the Nordics during the quarter. We believe Telenor has capacity to increase prices without losing subscribers, especially in Norway, where it is the incumbent with very high market share. We are maintaining our NOK 130 fair value estimate. The shares are up more than 5% at the time of the writing due to the improved financial outlook for 2023.

Telenor performed well on the sales side during the third quarter, with revenue in all the Nordic regions growing by midsingle digits (Norway 3%, Sweden 6%, Denmark 7%, and Finland 5%) thanks to average revenue per user, or ARPU, increases in all geographies and slight customer additions. However, Telenor’s EBITDA remains pressured due to increasing energy prices, a narrative we have already heard from other operators like Telia this quarter. EBITDA managed to grow by 2.5% but this was mainly due to a one-off effect, which offset the cost pressures from higher energy costs. Management estimates the effect of energy prices in full-year EBITDA will be around 300 basis points. We are trimming our fair value estimate by 11% to NOK 130 per share from NOK 147 to account for lower EBITDA margins in 2022 and 2023 coming from inflationary cost pressures and a slow but steady recovery from then onwards. We believe the energy situation adds further uncertainty to Telenor’s EBITDA. We remind we grant a High Uncertainty Rating to Telenor mainly coming from its Asian operations, which have currency volatility risk and political risk involved.

Telenor is the incumbent telecom operator in Norway and operates in Nordic and Asian countries. Its business is mature and growing slowly with high reliance on mobile operations, but it generates significant free cash flow. Telenor expanded into emerging markets earlier than many European telecom operators, positioning itself to benefit from a geographically diverse footprint.

Telenor announced it is selling a 30% stake in its Norwegian fiber infrastructure company at an enterprise value of NOK 36.1 billion. Telenor joins the wave of infrastructure carve-outs that we have seen among telecom firms in recent years, including Telefonica, Deutsche Telekom, and Telecom Italia, among others. The sale price represents an enterprise value/EBITDA ratio of 21 times, in line with other fiber transactions like Telefonica’s fiber sales in Chile and Colombia in the last year. The net proceeds for Telenor will be NOK 10.8 billion, and the company intends to use 30% of it (NOK 3.2 billion) for share buybacks, something we believe is accretive given the shares are trading 30% below our fair value estimate of NOK 147. We support this decision as minority infrastructure sales allow telecom companies to crystallize the value of their assets while maintaining operational control. We maintain our fair value estimate for Telenor.

Narrow-moat Telenor's second-quarter highlight was an impairment charge in its Pakistani business unit of NOK 2.5 billion (over a pre-impairment capital employed of around NOK 9 billion for this business unit). In May 2022, Telenor was forced to pay an increased price of NOK 1.7 billion to renew a spectrum license after a ruling from the Supreme Court of Pakistan. In addition, Pakistan’s macroeconomic environment has been deteriorating recently, with inflation hitting 21.3% in June 2022, according to Bloomberg and the Pakistani rupee having depreciated 25% against the Norwegian krone in the past 12 months. Other Asian currencies to which Telenor is exposed (Thailand, Bangladesh, Malaysia) have appreciated since last year or remained relatively stable. We highlight our High Uncertainty Rating on Telenor given it generates more than 50% of revenue and EBITDA in Asian countries with no fixed-line presence and volatile political and economic environments. As a reminder, Telenor fully impaired its Myanmar business unit in 2021 due to a military coup in the country.

Telenor is the incumbent telecom operator in Norway and operates in Nordic and Asian countries. Its business is mature and growing slowly with high reliance on mobile operations, but it generates significant free cash flow. Telenor expanded into emerging markets earlier than many European telecom operators, positioning itself to benefit from a geographically diverse footprint.

Telenor's first-quarter results were slightly weaker than expected, with flat sales growth year over year and a 2% decline in EBITDA due to higher energy and one-off costs. Although management expects some spillover effects into the second quarter, they reiterated yearly guidance of low-single-digit growth in sales and stable EBITDA for 2022 as they expect a recovery in the second half of the year, something that seems achievable to us. Currency effects were more moderate this quarter, causing a NOK 0.6 billion headwind compared with NOK 1.2 billion last quarter. We maintain our NOK 147 fair value estimate.

Telenor's fourth quarter fell short of consensus expectations on revenue and EBITDA, which is causing the shares to decline by almost 5% at the time of the writing. Currency effects, together with revenue pressures in Norway, Sweden and some Asian economies were the main contributors. Sweden, Pakistan and Thailand have seen their currencies depreciate compared with the Norwegian Krona during the past year, which reportedly caused subscription revenue to decline by 6%, despite remaining stable on an organic basis. The business recovery in some Asian regions like Malaysia and Thailand is also weaker than expected due to pricing pressure and a weak macroeconomic outlook. We trim our fair value estimate to NOK 147 (ADR: USD 17) from NOK 159 (ADR: USD 18.50) after adjusting our midterm revenue and margin forecasts.

Telenor is the incumbent telecom operator in Norway and operates in Nordic and Asian countries. Its business is mature and growing slowly with high reliance on mobile operations, but it generates significant free cash flow. Telenor expanded into emerging markets earlier than many European telecom operators, positioning itself to benefit from a geographically diverse footprint.

Telenor has agreed to merge its Thailand business, Dtac, with True, owned by conglomerate CP Group, in a deal that expects to create the largest telecommunications provider in Thailand. The deal values Dtac at THB 47.76 per share, but the shares are trading at a slight discount (THB 45 at the time of the writing), which we believe is explained by the regulatory approval still required. Telenor shares are up 1.5% at the time of the writing. We are maintaining our fair value estimate and narrow moat rating for Telenor, which owns 66% of Dtac.

Narrow-moat Telenor's third-quarter results were slightly below company-reported consensus, with service revenue down 0.1% organically and EBITDA declining 2.2%. The geographical performance was mixed, with Pakistan and Bangladesh performing well in local currency while the rest of Asia saw revenue headwinds. The same happened in Scandinavia, where good performance in Finland and Denmark was offset by Sweden. Management maintained its guidance, although year to date, results are close to the low end of the guided range. We are maintaining our NOK 159 fair value estimate.

Telenor is the incumbent telecom operator in Norway and operates in Nordic and Asian countries. Its business is mature and growing slowly with high reliance on mobile operations, but it generates significant free cash flow. Telenor expanded into emerging markets earlier than many European telecom operators, positioning itself to benefit from a geographically diverse footprint.

Narrow-moat Telenor returned to growth in second-quarter 2021 aided by Asian economies, mainly Pakistan and Bangladesh, which grew by high single digits adjusted for currency effects. A recovery in these economies was driven by the easing of restrictions but also came from easy comparable figures in 2020. However, there is no certainty about the sustainability of this trend in case a new COVID-19 wave hits, as Asian economies are laggards in testing and vaccinations and June already showed a deceleration in Telenor’s revenue growth in these geographies. In addition to this, currency fluctuations wiped out organic growth when translating it into Norwegian krone, as Asian currencies have strongly depreciated. Denmark and Finland also helped growth with mid-single-digit organic increases driven by upselling and mobile net customer additions. All this resulted in overall revenue (NOK 27.2 billion) growing 3.3%, adjusted for currency effects but declining almost 5% on a reported basis. Shares are fairly valued and we maintain our fair value estimate of NOK 159.

Telenor is the incumbent telecom operator in Norway and operates in Nordic and Asian countries. Its business is mostly mature and growing slowly, but it generates significant free cash flow (we expect almost NOK 20 billion on average annually for the next five years). Telenor expanded into emerging markets earlier than many European telecom operators, positioning itself to benefit from a geographically diverse footprint.