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Pakistan reportedly experiencing the worst floods in decades Internet and telecom services been affected, TEL offering free calls In Thailand: shareholder meeting on Oct. 3 related to the merger Telenor’s CMD on September 20 the next catalyst
Telenor ASA Telenor ASA
Nordic growth slows and Asia remains a black box In their domestic market Telenor continue to suffer negative service revenue growth driven by fixed legacy declines, whilst organic EBITDA growth was flat in Norway and Sweden (2% growth in Finland). Their Asian portfolio remains a black box as they await approval for MandA in Thailand and Malaysia where macro and tourism have not yet returned to normal. Management stated they are looking at a ''strategic review'' in Pakistan, which we believe is an attempt to sell out given challenging macro and socio-economic factors, and in Bangladesh there is a looming ban on new SIM cards (though they anticipate a quick resolution and therefore don''t believe it will affect growth in 2H). What do we know that we didn''t on Monday? EBITDA guidance for FY22 is now expected to be ''around 2021'' (previously ''around 2021 or slightly higher'') implying a small downgrade driven by challenging macro conditions and the competitive environment in Thailand. The opex increase in the quarter was driven partly by normalisation post Covid in addition to energy cost inflation (headwind of 1.7% on EBITDA growth in the quarter). Management anticipate fewer energy headwinds in FY23 will allow them to return to overall opex reduction next year, however we caution that a deepening of the energy crisis this winter poses a risk that a reduction in energy headwinds may take longer than anticipated. Has the investment case changed? No Our downgrade to Underperform was based on limited top-line growth in the Nordics and reduced optionality in Asia. Combined with a challenging inflationary macro environment there is focus on cost control, and without EBITDA growth the sustainability of the dividend may be at risk, in our view. Changes in estimates - we remain Underperform with TP of NOK107 unchanged We have updated our forecasts for 2Q22 results and the latest fx, with no significant changes to our FY22 EBITDA estimates. The increase in our...
We make minor estimate changes post Telenor’s Q2 results, which were slightly weaker than expected. While we expect cost inflation to continue to have an impact on EBITDA, better revenue trends in Norway within Fixed and lower y-y cost headwinds from energy should support improvements in 2H/22. The CMD on September 20 will be the next catalyst, where we expect an update on the M&A processes and the strategy for 2023 and beyond.
The group still expects EBITDA growth to lag revenue growth for a few quarters while, in Asia, the outlook for 2022 remains uncertain. Short term, with zero EBITDA growth and with capex still at a high level, a dividend increase for 2022 should not be expected. We maintain our Buy opinion because things could improve greatly in future in Asia with the major deals announced over the past year.
Q2 EBITDA “clean” -1% below estimates, or -2% adj. for Asian subsidiaries Impairment loss of NOK 2.5bn related to Pakistan license renewal case Reiterates FY 2022 revenue target, EBITDA to be “around 2021” ..(from EBITDA around 2021 or slightly higher”). Minor estimate changes.
Digi Q2: revenues 2% below but EBITDA 1% ahead of estimates Digi’s FY guidance unchanged on revenue, cut on EBITDA Telenor Group consensus for Q2 to be broadly unchanged post Digi
We expect soft Q2 results with cost headwinds from energy and M&A, weakness within fixed in Norway and continued soft Asian trends. Looking beyond Q2, we expect improvements from better revenue trends in Asia and Norway, the mergers in Malaysia and Thailand and the review of the Nordic tower portfolio to be potential catalysts. This could be a focus topic at the CMD in September, in addition to the strategy for 2023 and beyond.
Regulatory clearance in Malaysia – as expected Will not impact 2022 guidance; estimated synergies of USD 2bn The mergers in Malaysia, Thailand and review of towers are catalysts
While we expect continued soft results in Q2, we expect improvements in 2H/22 with better revenue trends in Asia and Norway and lower y-y cost headwinds from energy and M&A costs. Looking beyond Q2, potential mergers in Malaysia and Thailand and, we speculate, a potential minority stake divestment for the Nordic towers could be catalysts. We expect this to be a focus on the CMD in September, in addition to the strategy for 2023 and beyond.
Focus turns to inflation, with opex up 5% y/y Our recent work on Telenor''s operating prospects in the Nordics (see STAMP 2022) suggested consensus was overoptimistic on the service revenue outlook, given growing competition and deteriorating forward looking indicators (NPS, customer satisfaction, gross add and churn data), whilst our broad sector work on inflation (Escape Velocity) suggest telcos were likely to begin to see creeping cost inflation through 2022. This lack of revenue growth and inflationary cost pressure saw Telenor miss expectations at 1Q22 results. Looking ahead competition in Norway is increasing and costs pressures look set to continue (Telenor has less hedging on energy vs peers). What do we know today that we didn''t on Monday? Norwegian organic service revenue fell -2% as copper legacy declines outweighed fibre growth (copper revenue and COGS headwind of NOK0.9bn expected in 2022). New fibre subscriptions were weak and the company cited increasing overlap as the fibre roll out continues. Whilst they anticipate fibre growth will pick up towards the end of the year, the market impact of Lyse''s acquisition of Ice remains to be seen, including whether this will result in a greater shift towards FMC. Meanwhile Asian deals appear to be progressing according to plan, with the Malaysian merger expected to close in 2H22 and regulatory approval in Thailand anticipated in 2Q22. Has the investment case changed? No Given limited top-line growth opportunities and reduced Asian optionality given the deals, focus now turns to inflation and cost control - areas where these latest results demonstrate that Telenor faces particular pressures. We see Telenor delivering c.-3% EBITDA decline in 2022 vs guidance of flat to slightly higher EBITDA than 2021, with our 2023 OpFCF estimate c.-5% below consensus. Changes to estimates - TP reduced to NOK107, remain Underperform We have updated for 1Q22 results and the latest FX. Our TP is reduced...
The Q1 was slightly disappointing with revenues up by only 0.5% yoy and lfl while the EBITDA was down by 2.5%. Although the group still remains affected by the drop in tourism in Asia and particularly in Thailand, 2022 could be better than the poor outlook suggests but above all 2023 should be a year of solid growth. And, given the solid expansion via the mergers expected in Asia over the coming years, we maintain our Buy on the stock.
Q1 revenues in line with estimates, EBITDA adj. 3% below Finland, Pakistan, Thailand and Norway were below estimates on EBITDA 2022 guidance maintained. We expect to make minor estimate changes CMD on 20 September
Digi’s Q1 revenues/EBITDA came in -2.2% / +0.2% vs. estimates Marginal changes to Telenor Group Q1 estimates; -0.7% cut on EBITDA
GP’s Q1 revenues and EBITDA was +0.8%/ - 0.8% vs. estimates Marginal changes to Telenor Group estimates; -0.7% cut on EBITDA
We expect soft near-term results with continued weak earnings momentum, and cost inflation and energy prices to impact margins negatively. This and concern about dividend policy has weighted on the stock. However, looking beyond Q1, we believe this is discounted in the current valuation and potential mergers in Malaysia (~Q2) and Thailand (~2H/22) could give further upside. We expect more comments on this in a CMD, potentially in 2H/22.
DTAC’s Q1 revenues and EBITDA was -1% / -4% below estimates FY guidance reiterated, but excludes M&A costs Marginal changes to Telenor Group estimates; -0.6% cut on EBITDA
ICE Group was recently sold to Lyse, which also owns Altibox We do not expect it to impact the competitive environment as of now …though Lyse likely will try to cross sell a fixed-mobile offering M&A should be in focus for Telenor in the coming months
Following the Q4 results we adjust our estimates to reflect cost inflation and a gradual recovery in Asia through 2022. We find the current valuation as attractive, with Telenor trading below peers and with a 7% dividend yield (sustainable, in our view). An eventual gradual recovery in Asia through 2022, potential upside from M&A for Telenor and European telco consolidation for the sector should support share appreciation. The CMD could be a catalyst.
Norway disappoints, but the company targets Nordic growth in 2022 Organic service revenue fell c. 1% in Norway in FY21, but the company is targeting growth in the Nordics as one of their key priorities for 2022, aided by 5G migration. On the fixed side growth in fibre and FWA in Norway was more than offset by copper declines, with the company still on track to complete the copper decommissioning in 2022. However, it is perhaps disappointing that they expect to have realised only c.700m of the original target of NOK1.2bn opex savings from copper decommissioning by the end of 2022, with the full saving not being achieved until several years after. Looking ahead they place increasing focus on towers, aiming to establish a leading Nordic tower company through Telenor Infra. For now, their approach to towers is purely on the operational side. What did we learn from results? We believe the company''s 2022 EBITDA guidance (flat or slightly higher vs. 2021) was disappointing and it came in below expectations. Whilst they forecast modest service revenue growth in FY22, opex is under pressure from rising inflation and a return to a more normalised marketing spend - this is reflected across the sector (see Escape Velocity), but we believe Telenor has above average exposure to inflationary risks given their Asian portfolio and given Norway energy costs are based on the spot rate. The company cited their ongoing modernisation efforts as key to controlling spend in the face of inflation. Has the investment case changed? Not really Whilst momentum in their domestic market has slowed and optionality on the growth in Asia has reduced, the dividend remains reliable and delivers an attractive yield. Further upside is MandA dependent in our view. Changes to estimates - TP lowered to NOK130, remain Neutral We have updated for 4Q21 results and the latest FX. Our TP has decreased from NOK132 to NOK130 and we remain Neutral.
Although Q4 revenues were in line with expectations, EBITDA was however disappointing. In 2022, EBITDA should be around the 2021 level or slightly higher: this guidance is more cautious than expected. Although the group still remains affected by the pandemic and the drop in tourism in Asia, 2022 could be better than the poor outlook suggests. And, given the solid expansion in Asia expected over the coming years, we believe that buying Telenor today offers a good risk reward.
Q4 revenue in line with consensus estimates, EBITDA below In particular Norway, Pakistan/ Other below estimates ..stating higher energy cost, inflation and copper decline in Norway 2022 guidance broadly in line with estimates
Telenor has agreed with Charoen Pokphand Group to explore the combination of Telenor’s DTAC and True in Thailand. The new company could have c.55m mobile customers and revenues of c.€6bn. This deal should allow Telenor to strengthen its position in Thailand, a country where mobile activities should experience strong growth in 2022-23 if the recovery in tourism is there. However, Thailand is a three-player market and the deal could be stopped by the regulator. We maintain our opinion at Buy.
Guidance reiterated but disappointment as Nordic momentum slows Overall results weaker than consensus driven by Covid impact in Asia and slowing in momentum in its domestic markets. Management believes that growth in Norway can be replicated across the Nordic region by expanding their offering, aided by 5G in Finland and targeted advertising in Denmark. Sweden revenue growth slowed vs. prior quarter and this was a focus of discussions on the conference call. They expect Sweden to grow in future but no timeline was given. However, despite the confidence from the company on momentum, we struggle to see upgrades to consensus numbers especially with rising competition in Norway and dampening sentiment based on the ability of Altibox to provide FWA with the spectrum they''ve acquired. What do we know today that we didn''t on Wednesday? Asia remains a ''black box'' for the company, and whilst they see strong subscriber growth in Pakistan and Bangladesh, the tone was more sombre on Thailand - where covid pressures are significant and ongoing, and where Telenor over-indexes to the migrant worker and tourist segments. Meanwhile their modernisation programme is ongoing (1% opex reduction in 3Q21) and management see structural cost reductions as key to offsetting rising inflation. Energy cost increases in the quarter were driven equally by price and volume - the impact of price highest in Norway and volume most significant in Asia given the network rollouts. Has the investment case changed? Not really Nordic momentum has slowed, whilst the optionality on growth in Asia has reduced amid ongoing Covid uncertainty. However, the stock has a reliable dividend which still offers great yield. We remain Neutral. Changes in estimates - we reduce our TP to NOK135 and remain Neutral We have updated for the latest FX (which accounts for a significant proportion of the TP decrease) and for 3Q21 results. Our TP has decreased from NOK147 to NOK135.
Nordics strengthen but Asia remains a ''black box'' for Telenor Having surprised positively in the quarter, visibility in the Asian portfolio remains limited. Management are confident the return to growth can be sustained in 2H but concede that this could be hampered by a looming 3rd wave in Asia and continued uncertainty over when economic normality will return, making exposure to ''black box'' Asian revenues less attractive. Management confirmed their focus in Asia is to ''strengthen the position in which they are present'', seemingly aimed at countering the narrative they may look to sell out, which may disappoint some. What do we know today that we didn''t on Monday? The company upgraded FY21 guidance for organic service revenue 0-1% y/y and EBITDA 0-2% y/y, implying a minor upgrade to consensus (pre-2Q EBITDA going into results of +0.8%). Norway outperformed expectations with strong MSR (1.5% y/y) and fibre performance (28% y/y) helping offset legacy decline. Management reiterated their cautious stance that modernisation in Norway would negatively impact EBITDA in the near-term, citing the ''lumpy'' nature of IT transformation costs, but confirmed they are on track to meet their modernisation and efficiency targets in the next 18 months. Finland remains robust and notably Sweden achieved stabilisation in subs and traffic revenues - flat in 2Q after mid-single digit declines for much of the year, boosted by TV and fibre alongside better enterprise performance. Has the investment case changed? Not really Telenor is typically traded for optionality on Asian growth. Despite the increase in guidance, with a rising 3rd wave in Asia there is a question mark over the sustainability of Asian growth and whether Telenor will be able to meet the latest guidance. Changes in estimates - we increase our TP to NOK147 and remain Neutral We have removed Myanmar from the start of FY21 and updated for the latest FX and trends. As a result our TP has increased...
Quite a solid performance for the group in Q2 with revenues and EBITDA up respectively by 3.3% and 3.6% yoy and lfl. The stock has just recovered from its pre-COVID-19 level and we maintain our positive stance on Telenor. The group still remains affected by the pandemic and the drop in tourism in Asia but 2022 is taking a good shape (with also the sale of the Myanmar activities and a merger with Axiata in Malaysia).
Revenues and EBITDA in line (excluding recently sold Myanmar) 2% organic S&T revenue growth and 4% organic EBITDA growth Continued opex reduction driven by other opex 2021 outlook change: 0-2% EBITDA growth vs “flat” previously
Telenor announced that it has agreed to sell its operations in Myanmar Consideration of NOK 900m (NOK 470m is deferred payment over 5 years) Implied EV of NOK 5.2bn, NOK 3.7/sh and 1.3x/2.9x 2020/2021e EBITDA M1 Group is an investment holding group based in Beirut
Telenor has underperformed significantly lately with greater investor appetite for riskier assets, recovery being delayed and the issues in Myanmar. However, we think an entry looks attractive with return to growth, high yields at higher discounts to peers, low investor interest, optionality from M&A and low expectations following negative revisions. Thus, we re-iterate our BUY and have adjusted our TP to NOK 170/sh, partly reflecting 0 value applied on Myanmar.
Visibility zero in Asia The question is just how committed is Telenor to Asia? Myanmar could now be a legitimate zero with potential sanctions risk and the company sees little visibility over Covid recovery in the region. The Axiata deal on the table leaves the company with minority control in Malaysia, could this be a prelude to a future exit altogether? What do we know today that we didn''t on Monday? Management now guide for FY21e excluding Myanmar - reiterating the same guidance issued at the beginning of the year of flat development in organic service revenues and EBITDA and capex to sales within 15-16%. The Myanmar assets have been fully impaired (NOK6.5bn) given the shutdown of the data network leading to a halving of service revenues and no visibility on when this will be reversed. ''Alternative'' solutions are being considered for Myanmar given the very real possibility of corporate governance and/or sanctions risk which could force a sale. In the Nordics - Norway had a slowdown in service revenue growth but management remain confident that opex reduction coupled with pricing and product offering will see it along with Sweden have a better 2H with the latter still expected to see stable service revenues by 2Q21. Has the investment case changed? Not really We cut Telenor to Neutral from Outperform back in March on the basis that FY21 would be a tough year in Asia and the downgrades set to arise from Myanmar''s ongoing network shutdown. On fundamentals we see few positives for Telenor this year as the recovery from the pandemic is likely a FY22/FY23 event in Asia. However despite anticipating negative earnings revisions we remain Neutral given expectation of Asian consolidation - the company is still in talks with Axiata in Malaysia and we cannot rule out further deals in the continent. Changes in estimates - we cut our TP to NOK144 and remain Neutral We have cut our revenues estimates further due to Myanmar in addition to updating...
Q1 performance was globally in line with expectations and quite similar to those of the two previous quarters excluding Myanmar whose overall situation remains difficult. The business continues, however, to be impacted by the COVID-19 pandemic, in particular in Asia and through the reduction in roaming revenues. We maintain our Buy on the stock.
Group revenues and adj. EBITDA in line with consensus Strong performance in Denmark and Finland offsets SE Asia Myanmar fully impaired (NOK 6.5bn). Accounted for 7% of adj. ’20 EBITDA Excluding Myanmar, TEL reiterates guidance of flat y-y development
Asian recovery remains uncertain in FY21 Management issued a cautious outlook, uncertain over whether changing Asian consumer behaviour as a result of prolonged lockdowns impacting economic activity (in Malaysia and Thailand, both guiding for low single digit decline in service revenues) could be overcome by the return to growth in Emerging Asia. Whereas in the past this message would have weighed heavily on the shares, the more direct messaging about a pressing need to reduce overall exposure to Asia through consolidation opportunities provided support. This enabled the market to take solace from strong and improving trends in the Nordic portfolio. What do we know today that we didn''t on Monday? The company guided for flat organic service revenue and EBITDA growth for FY21 with capex to sales coming in at 15-16% of sales. They were keen to stress that despite lower capital intensity in FY20 due to the pandemic, there is no ''catch-up'' capex needed as investment is beginning to normalise across the portfolio this year. There was some disappointment that the structurally lower opex benefits from the ongoing cost transformation (lower FTE, IT simplification and broader digitalisation) did not translate to stronger EBITDA growth but we believe this was a case of management seeking to be conservative in light of the uncertainty in Asia. Has the investment case changed? Not much. At current levels, we think the market gives almost a floor price for the Asian assets which are still set for a 2H21 recovery. The Nordic markets remain strong with good underlying growth in Norway, 5G momentum in Finland and Sweden expected to reach revenue stabilisation by 2Q21. Adding the optionality of Asian consolidation suggests you can earn yield today with upside potential in 2H. Changes in estimates - TP cut from NOK161 to NOK158, remain Outperform We have updated our estimates for the latest FX and guidance. We anticipate flat service revenue evolution on...
Telenor ASA
Like in the previous quarters, the good news is that the revenue decline due to a continued roaming shortfall, in particular in Asia, was more than compensated by an opex reduction of 7%, resulting in a flat EBITDA. The stock is still down by 12.5% compared to its pre-COVID-19 level, while the dividend is rising by 3%. We maintain our opinion at Buy on the stock.
Q4 revenues 1% below consensus Q4 EBITDA 2% below consensus Telenor expects 2021 figures similar to 2020 We expect minor negative estimate changes for EBITDA
DTAC (Telenor Thailand subsidiary) just reported its Q4 results Revenues were 1% ahead but EBITDA 10.5% below estimates Telenor Q4 consensus down by -0.7% on revenue and -2.6% on EBITDA
Digi (Telenor Malaysia subsidiary) just released its Q4 results Digi’s Q4 revenue were slightly below estimates, EBITDA was in-line Digi’s 2021 guiding was slightly below estimates Marginal changes to Telenor Group estimates after Digi’s results
Launches a 5G version of FWA (broadband) – no impact on estimates M&A speculation in Europe: Vodaphone and Masmovil (once again) Recent EU ruling on 02/Hutchinson a catalyst for European consolidation?
The awaited Swedish spectrum auction today is delayed The authority is reviewing the validity of the Huawei restriction 1H/21 auctions in Scandinavia likely not material, Asia main uncertainty
Telia announces an unlimited subscription – following Telenor Norway Spectrum auctions in Sweden next week: do not expect it to be material 1H/21 auctions in Norway/Denmark likely not material, Asia uncertainty Capacity increased through both spectrum and increased efficiency on 5G
The Q3 EBITDA was even more clearly better than expected than in Q2, rising by 4% yoy despite a 2% decline in revenues. We maintain our positive stance on the stock with near-20% upside. The group offers a 5.75% dividend yield which is below its peers, while the dividend is in no danger given the control over capex.
A tale of two continents The equity story for Telenor was centred on a solid footing in its Nordic footprint attached to the optionality of faster growth in in both developed and developing Asia. The Norwegian business continues to show relative strength despite the impact of Covid, boosted by underlying upsell in new fixed, mobile data and pushing ARPU from adjacent services and unlimited data. At the same time dtac and Digi both downgraded guidance due to the impact of the pandemic on the tourist and migrant worker segments, whilst the remaining EM markets also remained sluggish. More than 75% of the NOK1.3bn impact of Covid-19 on EBITDA YTD has been in Asia. Reversing the trends in Asia is key to driving solid EBITDA growth and achieving mid-term guidance. What do we know today that we didn''t know pre-results? New fixed continues to offset fixed legacy declines in Norway, this has continued to surprise consensus. At the same time the company also achieved significant opex reduction enabling it to optically increase guidance for the year on EBITDA. Management also commented on the prospects for consolidation in Sweden, with the belief that you will not know what the regulatory authorities will accept till at least you ask them - they are willing to talk to anyone that is a seller. The Swedish business remains troubled overall, despite KPI momentum as Telenor continues to suffer from over-indexing to B2B relative to its peers. Has the investment case changed? Not really We believe the current share price discounts much of the growth prospects in Asia due to investors staying away from EM exposure during Covid, meanwhile the Norwegian core remains strong with solid, if not spectacular growth from DNA in Finland. The company also has MandA optionality from Asia (and locally in Sweden/Denmark), with the Head of Asia tasked with looking for consolidation opportunities, we believe a deal is possible in the next 12mths. Changes to estimates -...
We make minor estimate changes post Telenor’s Q3 report, which came in slightly above estimates on EBITDA. Going forward, we model a stable development in the Nordics and a mixed recovery in the Asian markets. In addition, we see optionality from M&A in both the Nordics and in Asia. We consider the current valuation attractive, with Telenor trading at a discount to peers and potential positive sector news also supporting a re-rating for Telenor.
Q3 revenues in line with estimates, but EBITDA 4% ahead Norway and Pakistan ahead, Myanmar and Thailand below estimates 2020 guidance maintained on revenues, increased on EBITDA We expect minor positive estimates changes
Grameenphone (Telenor Bangladesh subsidiary) reported its Q3 results GP’s revenues and EBITDA broadly in-line with estimates Marginal change to Telenor Group estimates for Q3
DTAC (Telenor Thailand subsidiary) reported its Q3 results Revenues were 5% below and EBITDA was 1% below estimates Telenor Q3 Group consensus down by 0.5% on revenue …and no change on EBITDA following Digi and DTAC’s results today
Elisa (peer in Finland) just reported its Q3 results Revenues and EBITDA broadly in-line with consensus estimates Neutral read-across to Telenor’s DNA in Finland Telenor M&A optionality remains; in Sweden/Denmark and in Asia
Digi Q3 results (Malaysia) above estimates on revenue, in-line on EBITDA 2020 guidance slightly cut on revenues and EBITDA Telenor Group consensus for Q3 to be slightly increased following Digi Q3 Q3 revenues for Telenor Group up by 0.5% and EBITDA by 0.2%
