Telia's Q2 2026: Service Revenue Acceleration Meets Portfolio Simplification

Nordic telco delivers fastest growth in four years, beats free cash flow, and executes on Halebop closure without customer disruption

TELIA.ST · Earnings Call · 2026-07-17

Acceleration in the Core

After a period of steady but modest top-line expansion, Telia's Q2 2026 marks a decisive inflection. Service revenue growth accelerated to 2.8%, the highest in four years, comfortably surpassing the full-year ambition of around 2%. As CFO Eric Hageman put it in the prepared remarks, “Service revenue growth accelerated in Q2 to 2.8%, which is comfortably above our full year ambition of around 2%.” — Eric Hageman, Chief Financial Officer · 2026-07-17 This acceleration is broad-based: Sweden continues to deliver 2.6% growth with strong consumer momentum, Lithuania remains a standout with EBITDA growth approaching 9%, and Norway's revenue growth visibly improved to 4.1% as the wholesale headwind faded. Even Finland, long the weakest link, saw service revenue growth turn slightly positive, supported by cost discipline and a more stable competitive environment. The group EBITDA margin expanded to 40.5%, a direct result of both profitable growth and relentless cost control. This is not a one-off quarter; it reflects the cumulative effect of the company's convergence strategy, particularly its household-focused approach in Sweden, where over one million converged households now drive loyalty and economics. The Cost control discipline has been sustained across the organization, with OpEx declining around 1% despite increased marketing investment in Norway.

Simplification Pays Off

Beyond the numbers, Q2 was defined by decisive portfolio action. The closure of the Halebop mobile brand—a move that had been planned for over a year—was executed with remarkable smoothness. CEO Patrik Hofbauer noted in the Q&A, “The Halebop migration went very well, according to plan, and no surprises, no increased churn.” — Patrik Hofbauer, Chief Executive Officer · 2026-07-17 This simplification, part of a broader agenda to streamline operations and focus on core growth areas, also saw the agreement to transfer part of Telia's Finnish ICT business to a partner, reducing revenue by approximately EUR 40 million annually but with virtually no EBITDA impact. The company also completed the acquisition of Bredband2, adding 500,000 broadband customers and providing a springboard for cross-selling. The Halebop closure is emblematic of a wider strategy to position Telia as the premium brand while nurturing the value-oriented Fello brand. As Patrik explained, "We continue to build our premium position with the Telia brand," and the early results are promising—positive mobile net adds across its three biggest markets, including Sweden, where the migration actually improved commercial momentum. The Simplification agenda is also evident in the Finnish market, where a gradual shift to fixed-term contracts has reduced churn and set the stage for pricing recovery.

Financial Discipline and Cash Flow

Free cash flow performance was a highlight, with Q2 coming in at SEK 2.2 billion and year-to-date at SEK 4.1 billion, ahead of the company's own internal plan. The beat was driven by better profitability, lower interest paid, and a favorable working capital reversal.

The positive surprise was working capital. If you recall last year, we had very strong working capital inflow, mainly in the fourth quarter, and at some stage that will reverse. We expected around SEK 1 billion reversal this quarter, and we had SEK 600 million. A big part of that is driven by mission-critical payments.
Eric Hageman, Chief Financial Officer · 2026-07-17

This performance allowed Telia to reiterate its full-year ambition of around SEK 9 billion in free cash flow, now absorbing the NOK 400 million Norwegian tax payment related to a historical VAT ruling. CapEx discipline remains a cornerstone—rolling 12-month CapEx is at SEK 12.5 billion, below the SEK 13 billion outlook—while ROCE has climbed to 10.6% from 9.3% a year ago. Leverage stands at just over 2x, at the lower end of the target range, giving the balance sheet flexibility for future bolt-on acquisitions and potential shareholder returns. The management team's confidence in the second half is underpinned by a re-acceleration expected in Q4, driven by Sweden and Finland, following a slightly softer Q3 due to project phasing.

Outlook and Confidence

Despite a softer expected Q3, management's outlook for H2 is unchanged, with full-year EBITDA growth around 3%. The competitive landscape across the Nordics has not structurally deteriorated—Patrik noted, “We see the market a bit different. Fairly healthy market.” — Patrik Hofbauer, Chief Executive Officer · 2026-07-17 This is a significant reassurance after competitors have cited intensifying competition, particularly in Finland. The Finnish market, which has been a drag for years, is showing signs of stabilization, with the company's market share declining at a slower pace and ARPU trends improving. The strategic shift towards mission-critical services and sovereign AI capabilities, including the partnership with KTH and Brookfield and the launch of Telia Critical IoT Connectivity, positions Telia for the next wave of enterprise demand. As the company executes on its 2027 targets—service revenue CAGR of around 2%, EBITDA CAGR of 4%, and free cash flow above SEK 10 billion—this quarter provides tangible evidence that the plan is working. The combination of top-line acceleration, cost discipline, and portfolio simplification suggests Telia is not merely riding the Nordic telco wave but actively shaping it.