Translation: Original published in Finnish on01/30/2026 at 09:33 am EET

We raise our target price for Telia to SEK 38.0 and reiterate our Reduce recommendation. Telia's Q4 figures were slightly softer than our expectations, but the guidance for 2026 was somewhat more optimistic than our estimates. In the big picture, confidence in earnings growth and particularly in cash flow has improved over the past year. However, the slope of earnings growth is not quite enough to turn the valuation attractive.

Q4 was operationally slightly softer than expected, but cash flow was good

Telia reported that Q4 revenue decreased by 2% to 19,861 MSEK, which was slightly below our estimates. Comparable service revenue growth accelerated to 2.1% (Q3: 1.0%) after two softer quarters, which is positive. Adjusted EBITDA increased by 3.7% and was slightly slower than our and the consensus expectations, driven by Finland and Norway. Cash flow was strong (2.4 BSEK) in Q4, supported by working capital. Thus, the full-year 2025 cash flow was 9.3 BSEK, which is a good improvement from previous years. The company's Board decided to propose a dividend of SEK 2.05, which is the firast increase in 4 years, and, positively, cash flow finally covers the dividend.

Large geographical differences

Geographically, revenue growth was driven by Sweden and the Baltics, while operations in Finland and Norway were weaker than expected. In Finland, competition intensified further in Q4, which was reflected in very high churn (29% vs. Sweden 15%). Telia had commented in Q3 that it was investing in marketing in Finland, but in light of the numbers, this did not yet yield significant results in Q4. Geographically, earnings growth was strong in Sweden (6%), weak in Finland (-6%), and very weak in Norway (-9%). The company commented that it expects performance in Finland and Norway to gradually improve this year.

Stronger than expected guidance for 2026

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 Q4 report, we only made minor adjustments to our operational estimates and slightly raised our dividend estimates. Regarding the dividend, it is now positive that the cash flow already covers the dividend itself. We forecast revenue to grow by 1.5% and adjusted EBITDA by 2.2% in 2026 (consensus before Q4 report +0.5% and 2.0%). In 2027-2028, we expect revenue to grow by ~2% and profitability to improve marginally. Earnings growth is mainly supported by continuous efficiency measures and, in the short term, the gradual recovery of weak markets (Finland and Norway). In the big picture, however, confidence in Telia's earnings capability and particularly its cash flow has clearly improved. In part, this is certainly due to the company's improved, focused approach.

The valuation picture is not quite sufficient for a positive view

We forecast Telia's adjusted P/E and EV/EBIT multiples for 2026e to be 16x and 15x, respectively. The multiples are slightly above the Nordic peers and around 10% above the entire peer group. In absolute terms, the valuation level is already approaching an attractive level. However, in relative terms, we find the valuation relatively neutral, considering the gentle slope of earnings growth and numerous past disappointments. . The expected return on the stock, consisting of a dividend yield of some 5.5% and modest earnings growth of about 2%, isn't quite sufficient to meet the required return on equity and, thus, warrant a positive view on the stock. A positive view on Telia would require a better outlook for stronger earnings growth in the coming years.