Translation: Original published in Finnish on 7/20/2026 at 8:30 am EEST.

We reiterate our SEK 41.0 target price for Telia and raise our recommendation to Reduce (was Sell) due to the decrease in the share price. Telia's Q2 revenue and earnings slightly exceeded our expectations but were in line with those of the consensus. In the big picture, confidence in earnings growth and particularly in cash flow has improved over a little more than the past year. However, the slope of earnings growth is insufficient to turn the valuation positive, as the valuation picture is tight (2026 adj. EV/EBIT 17x and P/E 19x).

Q2 well in line with market expectations; positive performance in Norway

Telia reported Q2 revenue up 4% at 20,705 MSEK. The comparable service revenue growth we track was 2.8%, an improvement from 2.1% in Q1. The company is thus well on track to achieve its 2026 service revenue growth target of around 2%. Geographically, Norway was a positive surprise, returning to growth, and other key markets developed in line with our expectations. Adjusted EBITDA increased by 1.7% to 8,378 MSEK and exceeded our expectations, as well as the consensus expectations by a small margin. Non-recurring costs were higher than we expected, and thus the reported result was nearly in line with our expectations. Cash flow was 2.2 BSEK, clearly exceeding our estimate, the consensus estimate, and the company’s guidance of just over 1 BSEK, though it will likely level off in H2.

Good performance over a longer period has improved quality

Under its current leadership, Telia has significantly improved its operational performance, in terms of both earnings growth rate and alignment of words and actions. In our view, this strong performance is also partly the result of previous strategies, as 10 years ago, the company began simplifying an overly complex and difficult-to-manage structure. This "simplification" and improvement of focus took many years and involved some misguided strategic acquisitions along the way. However, the company now appears to be in a much better position to implement its strategy and achieve important earnings growth.

Telia well on track to meet guidance

The company expects comparable service revenue to grow by 2% and comparable EBITDA to grow by some 3% in 2026. In addition, Telia guides for cash flow of around 9 BSEK in 2026, assuming normalized spectrum CAPEX of 650 MSEK. Based on the Q2 report, we only made minor adjustments to our estimates (−1–+2%). Overall, the company has experienced consistent earnings growth without major setbacks for some time now, which has lowered the risk level. We forecast revenue to grow by 2.9% and adjusted EBITDA by 3.4% in 2026 (consensus before Q2 report +3% and 4%). In 2027-2028, we expect revenue to grow by ~2%, with no change in profitability. Earnings growth is mainly supported by growth in service revenue and, geographically, the gradual recovery of weak markets (Finland and Norway).

Price decline has eliminated most of the overvaluation

In recent years, Telia has clearly improved its operational performance and delivered on its promises more consistently. This means that the recurring disappointments of the past 10 years have clearly decreased. The share price (2026e, adj.  EV/EBIT 17x and P/E 19x) still indicates a continuation of strong performance, even though the most significant overvaluation has been eliminated with the drop in share price. However, the valuation relative to its closest Nordic peers and Elisa has widened, and the company now trades at a 19% premium to them (was 13%). Thus, the absolute valuation is tight, and the relative valuation remains very tight in our view, even though the quality gap has narrowed and, in part, even turned in Telia's favor. In our view, however, maintaining the growth rate of earnings is challenging now that significant efficiency measures have already been implemented. Although Telia’s risk profile has declined due to its improved focus, a more positive view of the stock would require signs of a faster earnings growth rate (~2%) than we are forecasting in the coming years.