Swedish telco talks up cost-cutting as it reports Q3 numbers, reiterates outlook for full year 2017

Telia Company on Thursday said it still aims to sell its stakes in operations in a number of Eurasian markets by the end of this year, although it accepted that this might not be possible.

The announcement came alongside the publication of the Sweden-based operator’s third-quarter financial results, which saw earnings and sales dip slightly, while the telco talked up its ongoing cost-cutting efforts and work to improve free cash flow.

"The third quarter of 2017 marked yet another quarter where we step by step are approaching a pure Nordic/Baltic footprint," Telia chief executive Johan Dennelind said, in a statement.

In September Telia sold its remaining 7% direct stake in Turkcell and offloaded around 6% of Russia’s MegaFon, announcing plans to reclassify the remainder as a financial investment from Q4. It is still working on the disposal of its stake in Fintur Holdings, a joint venture with Turkcell that holds stakes in Georgia’s Geocell, Moldova’s Moldcell, and Azercell in Azerbaijan.

"For Fintur Holdings we see continuous progress and high activity and it is still our ambition to divest these assets before year-end, even if I will not set that as a firm deadline," Dennelind said.

In the three months to the end of September, Telia posted a 0.5% decline in net sales in local currencies, while sales in reported currency fell 8.8% to 19.63 billion kronor (€2 billion).

Adjusted EBITDA dipped by 0.4% in local currencies and slid 3.6% in reported currency to SEK6.6 billion, while adjusted operating income was down by 19.6% to SEK3.81 billion, hit by the sale of Turkell shares.

The telco swung to a total net income of SEK2.54 billion from a SEK8.64 billion loss in the year-ago quarter. The previous year’s figure was impacted by a provision Telia made for its settlement with authorities following the Uzbekistan corruption investigation. It finally reached a settlement in September this year at a cost of close to US$1 billion. It has yet to find a buyer for its Uzbekistan operation, Ucell.

"From a financial aspect, I am pleased that we can now show that the trends we have been talking about all year are materialising," said Dennelind, on the Q3 2017 figures.

"Both the activities to reduce our cost base and the efforts we have made to improve cash flow are yielding positive results," he said.

Free cash flow fell to a negative SEK1.28 billion in the quarter, but operational free cash flow was up by 34.4% to SEK2.81 billion.

"Our ambition to reduce our cost base (amounting to an expected SEK38 billion in 2017) by 3%, on a net basis in 2018 over 2017, is on track," Dennelind said, adding that the telco reiterates its full-year outlook for 2017 on EBITDA and operational free cash flow.