Welcome everyone to Telia Company's Q3 2025 results presentation. With that, I will now hand it over to Telia Company's Head of Investor Relations, Erik Strandin Pers. Please go ahead. The floor is yours.
Thank you, Jen. Welcome everyone to the call. We have our CEO Patrik Hofbauer and our CFO Eric Hageman in the room, and I hand over the word to Patrik.
Please go ahead. Thank you, Eric, and good morning. Q3 was in many ways an important quarter as it confirms that we are doing the right things for our customers group wide NPS. The net promoter score continued to improve and has trended positively all quarters this year. Telia Sweden again won a clear majority of awards in the customer satisfaction survey by SKI, and in both Finland and Norway we had strong outcomes in the episodic PEPSIS surveys on our customer satisfaction. We also continue to deliver on the value creation plan that we laid out in Q3 last year, with EBITDA growth supported by profitable growth in service revenues as well as cost efficiencies. This helped drive an increase in free cash flow, which again more than covered our SEK 2 billion dividend for the quarter.
As we talked about already three months ago, it was an eventful M&A quarter. The closing of TV and Media business transactions strengthened our balance sheet further. In July, we also signed the Memorandum of Understanding with our partner in Latvia, and we are now working hard to ensure that both parties fulfill the commitment to sign a share purchase agreement before year end. We have also launched a formal offer to buy Bredband2, which will strengthen our consumer business in Sweden. Finally, we are upgrading our full year outlook for the free cash flow to around SEK 8 billion from SEK 7.5 billion before, reflecting, among other things, strong capex discipline. We are also now changing our full year outlook for book capex from SEK 14 billion to around SEK 13 billion. Now let's go into the financial highlights.
Service revenue growth continued to be good in Sweden and the Baltics, but partly offset by decline in Norway, meaning overall growth of 1%. EBITDA growth of 4.4% was, as expected, a bit below the ambition for the full year, but not too much. With both Sweden and Finland continuing to perform well, capex continued to be well below our SEK 14 billion limit. Even though we expect a seasonal pickup in Q4, we are already comfortable. We are very comfortable to lower the full year outlook to around SEK 13 billion. Free cash flow will continue to be strong, driven by higher EBITDA, lower interest payments, and positive working capital movements. This, together with growth in EBITDA and proceeds from the TV and Media business divestment, resulted in a lower leverage, and we ended the quarter at 1.93x.
Moving now to Sweden that is performing well on customer metrics, we had a strong outcome in the 2025 SKI survey. For example, Telia won the award for most satisfied enterprise mobile customers and in consumer Telia had the happiest customers among the mobile main brands and Fello came out well among sub brands. Telia's TV service also had the most satisfied TV customers. More importantly, new customers signing up across mobile, broadband, and TV. As you can see here, the broadband intake stands out as it actually is a result of two good quarters rather than one. Since around 10,000 new customers in Q2 were registered in Q3, the late registration was related to a transition into a new system. In enterprise, we signed a long-term partnership with Sweden's largest train operator SJ to deliver high-quality communication for the entire train fleet.
Financially, Sweden is well on track to reach the full year plan with service revenue growth at 2% driven mainly by broadband and TV. As a reminder, revenue growth on a quarterly basis is affected by project-based revenues which is lumpier than subscription-based revenues. In Q4 we expect more project-based revenues than we had in Q3 and EBITDA growth was again strong on the back of profitable growth and cost savings driven by the change program. Let's now move east to Finland. That came out as the number one in the EPSIS survey on customer satisfaction in both consumer and enterprise. This is promising and shows that we have good foundation in Finland to build on mobile. Net debts improved and we did not lose any mobile handset customer this quarter. The net loss was due to mobile broadband where the market is declining.
Our SME base grew as did the number of consumer handset customers for the first time in a very, very long time. ARPU grew at the same time by 4% on fiber. We are also adding customers not least from being service provider in our Valukoyton and JV network. Financially, we saw a slight improvement in service revenue trends with growth in consumer and a decline in enterprise driven in part by our choices to discontinue non-core activities and in part by a weak market. Finally, the strong execution of the change program continued to give tangible savings and resulted in EBITDA growth at high single digits with the margin climbing to 34.6% versus 32.5% one year ago.
In summary, we are making progress on all three of our mid-term ambitions for Finland that we presented one year ago: a stabilization of the mobile market share, improvement in SME, and improved profitability. Now moving west to Norway, which, as expected, saw another challenging quarter with both service revenue and EBITDA growth clearly in negative territory due to lower mobile wholesale revenue and headwinds in the broadband and TV. Like for Sweden and Finland, Norway came out well in customer satisfaction surveys, with Fourneiro winning the EPSO survey for the fourth consecutive year in the B2B category. We expect to have reached the low point when it comes to service revenue, although not yet when it comes to EBITDA because of the timing of OpEx. EBITDA decline in Q4 is currently expected to remain similar to the levels we have seen in Q2 and Q3.
The reason for headwinds in Norway are well known, and the mobile wholesale decline is expected to be around SEK 95 million in the fourth quarter. The other part, weak performance in our fixed business, is something we are addressing very actively, and on the next slide I want to share some more information about this development. We have now launched a new value proposition in all segments, modernized our TV platform, modernized our installed base of CPEs, signed future-proof new content agreements, and created a dedicated organization for fixed consumer services. Network quality has improved, and as you saw, we added TV and broadband customers in this quarter. At our investor update one year ago, we talked about the backbone of our network being already fully fiberized, and around 50% of our broadband customers were on fiber or fixed wireless access connections.
Today, the share is around 55%, and as we have said before, this is too slow, and from next year we will see a clear acceleration in the coax to fiber upgrades in line with the commitment we made last year to invest more. This will be done within our existing CapEx frame. Now moving on to Lithuania, which had a solid quarter with healthy service revenue growth supported by both mobile and fixed. Something that, together with continued efficiencies, resulted in an EBITDA growth of 9% and EBITDA minus CapEx that remain at a record high level of SEK 1.6 billion on a rolling 12-month basis. At the end of the quarter Lithuania successfully launched Telia Safe, a security add-on, and it's also completed an IT transformation within B2C achievements which will help our growth journey going forward.
Now let's move to Estonia that saw both service revenue and EBITDA growth accelerating following great momentum, especially the public sector and good work on generating efficiencies. Like for Lithuania, cash conversion remained at record levels and with that I hand over to Eric before I come back to summarize the quarter.
Thank you Patrik. Let me now go through the financial development of the quarter, starting as usual with service revenue and EBITDA. In the quarter, service revenue growth remained at 1% as stable or improved performance in Sweden, Finland, and the Baltics was offset by pressure in Norway, predominantly driven by lower wholesale revenue in Finland. We also continue to simplify our product portfolio, and we are now getting close to the end of the ramp down of the e-invoicing business. Year to date, we are at 1.3% service revenue growth, and looking into the last quarter of 2025, we expect an improvement related to pricing growth in enterprise and public sector contracts and less revenue decline in Norway.
Moving to EBITDA, growth in Q3 was somewhat below the 5% ambition for the year as we flagged three months ago, with all markets except Norway growing on the back of higher service revenue growth and efficiencies created by the change program. We are also encouraged to see that our EBITDA margin was 140 basis points higher than in the same quarter last year, in line with our margin expansion promise at the Investor Update September last year. As mentioned, we expect improvement in service revenue growth in Q4. For EBITDA, we currently expect growth in Q4 to be approximately similar to the growth rate we saw in Q3, penciling in a modest increase in sales and marketing cost both in Norway and Finland. Moving now to OPEX and capex.
As we can see on the left-hand side of this page, continued cost discipline and the positive impact of our change program continues to drive down resource cost. Our operating expenses declined by 2.9%. This more than compensated for an increased level of marketing spend across the Nordic markets as well as higher pricing from IT vendors. OPEX as a percentage of service revenue continued to trend down this quarter, this time by 120 basis points to 28.4%. We increasingly managed to do more with less and have only just started on this journey to become more efficient. We also remain very committed to being disciplined on our capital expenditures. As you can see from the middle graph, we ended the quarter with capex of SEK 12.5 billion on a 12-month rolling basis, more than SEK 2 billion less than 24 months ago.
This shows how being focused and having clear priorities can be translated into better capital efficiencies. Capex spend is expected to increase somewhat in the last quarter of the year in line with normal telco seasonality, but overall we don't expect the current run rate to change much, which is why we today lowered our expectations for the full year to around SEK 13 billion. Finally, as you can see on the right-hand side, growing EBITDA and lowering capex resulted in EBITDA minus capex comfortably above the SEK 19 billion on a 12-month basis. This equals a step up of 9% versus a year ago and also resulted in a much improved cash conversion, which is now 61% on a rolling 12-month basis, up from 58% a year ago. Let's now have a look at the free cash flow for the quarter.
Free cash flow improved by SEK 1.5 billion compared to the corresponding quarter last year, and as for several quarters now, the key building block is our profitable growth. Cash capex increased by SEK 300 million, which was driven by phasing in payments and a rebalancing of the vendor fund financing program, the latter however having an equal positive contribution to working capital. Interest payments declined by SEK 300 million due to lower debt and partly also because last year's number was rather unusually high due to phasing of interest. Between Q2 and Q3, working capital was, as you can see, marginally positive, which was a significant improvement versus last year as the number then was impacted by the rightsizing we did of our vendor financing program.
Finally, we saw SEK 200 million higher outflow of minority dividends in Q3 related to a catch-up dividend paid to our co-owner of a mobile business in Latvia. Overall, with SEK 6.9 billion free cash flow delivered in the first nine months of the year and the clear belief that the cash flow generation will remain strong also in Q4, we raised the outlook today for the full year from around SEK 7.5 billion to now around SEK 8 billion. Let's now briefly look at our net debt and leverage development. As you can see on the right-hand side, our net debt decreased by SEK 7.1 billion in the quarter as free cash flow more than covered our quarterly dividend payment and we also received the proceeds from the divestment of TV and Media business.
The combination of lower debt and growing EBITDA reduced leverage to 1.93x compared to 2.09x at the end of last quarter. Looking at the longer term trend on the bottom of the left of this page, we can clearly see that leverage has come down over the last two years as we have grown EBITDA and used the cash proceeds from our divestments to improve our balance sheet. This now puts us in a very good position to further strengthen our business, like for example the last quarter announced SEK 3 billion acquisition of Bredband2 in Sweden. The phase two investigation of Bredband2 has now started, and as said before, we expect to close the transaction in Q1 next year.
Finally, before I hand over to Patrik, I would like to say a few words on some of the milestones we have achieved in the third quarter and how that resonates with our value creation agenda laid out at the Investor Update about a year ago. As you may remember, we laid out a clear agenda at the Investor Update on how we aim to create shareholder value, and I believe we continue to make good progress on it. Firstly, free cash flow has covered our dividends for the first nine months of the year, and as you have seen in our updated outlook, we expect that also to be the case for the full year. 2025 is the first time in quite a number of years where our free cash flow generation covers our dividend commitment without the recourse to growing vendor financing.
Largely, this free cash flow uplift is driven by a profitable growth trajectory and capex discipline, the latter which we also upgraded today. Secondly, on active portfolio management, we closed the TV and Media business transaction this quarter and are making a bolt-on acquisition to further strengthen our core business in Sweden while we are working hard on securing the full exit from Latvia. Thirdly, our balance sheet continues to strengthen, liquidity is strong, and after closing the TV and Media business divestment, we are below the 2 to 2.5x net debt to EBITDA range. Fourthly, we paid another quarterly dividend to our shareholders, and we remain committed to deliver on a progressive dividend policy. Finally, at the CMD last year, we set out a plan to return to an all-in free cash flow covering our dividend commitment.
Our free cash flow guidance upgrade today means we will be covering the dividend despite the absence of the free cash flow from our TV and Media business. See this as another proof point that we are very serious about delivering on our commitment to shareholders. With that, I hand back to you, Patrik.
Thank you, Eric. Before I summarize the quarter, I want to reflect on what has taken place since we launched our change program last year and how we are taking steps toward a simpler, faster, and more efficient Telia. The number of employees and resource consultants in Telia is now almost 25% fewer than it was at the start of 2024 after our change program and the exit from the TV and Media business. Central resources are down by half. We also have half as many products and half as many IT systems managed centrally compared to the start of last year. Many have been moved and are now managed by the country organizations who are closer to the customers, and some have been closed down. We are encouraged by the results so far.
Network incidents have continued to become fewer, and so has incoming calls from customers who are contacting us with issues or end questions. This means both better customer satisfaction and material monetary savings. Meanwhile, employee engagement is up, and our people see that barriers to execution are being removed. Collaboration and decision making is improving, and of course EBITDA growth has improved. This is a promising start, a first few steps, but we intend to do more on all parts of our agenda. We can still become much simpler, faster, and more efficient than we are today. On the summary of the quarter, which was overall in line with our own internal expectations, we continued to see healthy group EBITDA development supported by profitable growth and efficiencies from the change program.
We continue to see clear signs that customers appreciate our high quality services and see the benefit from how those improved their everyday lives. We continue to execute on our agenda, and we can now upgrade our free cash flow from outlook to fully cover our dividend, as Eric said, which is a key milestone for us. With that, I will open up for questions. Thank you.
To join the queue to ask a question, please press Star five on your telephone. Again, that's Star five on your telephone to ask a question. Our first question comes from Owen McGiveron with Bank of America. Your line is now open. Please go ahead.
Thank you and good morning, it's Owen McGiveron from Bank of America here. On your upgraded guidance, how should we think about 2026 and 2027 capex within the frame of your medium term ambitions? Should we expect similar levels versus 2025 or more moderation? How does the additional investment in Norway play into this? Just wanted a few more details on the moving parts. Thank you.
Good morning. I can start. It's Patrik here. First of all, we are not guiding yet on 2026 and 2027. We will come back to that in January. I can say we have worked hard and actively to improve, I would say, the discipline when it comes to cost and also how we use the capital. That discipline will not be less next year or the coming year. We continue to see how we can use the capital much more efficiently than we are today. That will continue. We will come back in January with the guidance or update or whatever in January in that call. Eric, do you want to add something?
Yeah, I mean that would just be my simple observation that it doesn't change so much from one moment to the next with regards to Norway. It's part of that. The slide that Patrik talked about where we say we want to accelerate the rollout of fiber, that part is at the SEK 1 billion that we already talked about in the investor update last year. Part of that money is being invested this year. Part of it will be invested in the coming couple of years. It's firmly part of that capex guidance that we have just talked about.
Okay, thank you very much.
Our next question comes from Andreas Joelsson of DNB Carnegie. Please unmute your line and ask a question.
Thanks a lot. Good morning everyone. Just to follow up on your comment on further efficiency gains, could you perhaps describe how you view the cost base currently and what else you can do from the last slide? It seems like you have been able to do this change program without any basic negative effects. Are you encouraged to do more? Do you think you can do more on the cost side in order to get these efficiency gains? Blurry question, but I hope you understand.
Good morning, Andreas. I understand your question very well. It was not blurry at all. First of all, the change program went obviously very well. We have delivered on basically all parameters, and we see that the operations are really much more stable, which we had, of course, concerns about when we do this big change that we did last year. So far, everything is running very well. Remember last year when we had this investor update, we gave out a three-year plan with CAGR on service revenues around 2%, EBITDA at 4.4%, and a free cash flow above SEK 10 billion or at least SEK 10 billion in 2027, and that requires us to continuously work with efficiency to deliver on that plan.
We are fully committed to deliver on the plan that we have put in place, which means that we work actively, of course, to improve the operations from year to year. I think that is a clear answer on your question where we are heading. I hope, I hope at least.
Yes, absolutely. Less blurry than the question.
Thank you.
Our next question comes from Andrew Lee from Goldman Sachs. Your line is open. Please go ahead.
Good morning everyone. I had questions, one each on Finland and Norway, which are two of the areas where investors have had a bit less certainty recently. Just on Finland, there's some slightly improving service revenue growth trend today and also subs trends. Could you just talk about how you're achieving that and also how you're thinking about the balance of not disrupting the market too much given we've had one of your competitors basically disappoint fairly materially on their mobile service revenue growth outlook in the near term? Just comments around kind of how you're improving and how you don't disrupt the market too much will be helpful. Secondly, on Norway, there are quite a few tailwinds or easier comps as we go into Q4. One of the ones that's harder for us to judge is the price rises that have been put through in Norway in September.
I wonder if you could just talk about how you see the competitive environment and price rises boosting growth from Q4 onwards. Thank you.
Morning Andrew and thanks for the questions. I can start with Finland, I think Eric, you can take Norway then. We develop a little bit here, starting up with Finland first. I mean the most important part is actually the customer satisfaction, which we have been invested quite heavily in. We have upgraded our network and on several activities that we're now seeing paying off. On top, we also add some good execution here, especially in the consumer side, to turn these trends around. We are not at all disrupting the market. I don't know where that is coming from. We are very disciplined, but we have good offers in the market together with a good network and good services overall. We also have a customer consumer operation that is more efficient every day.
Remember we have said clearly that we are accepting to lose market shares in Finland for too many years now. We said clearly we want to stabilize that, and that is what we're doing. We see good development in Finland when it comes to the consumer business. Still, we have a lot more to do. Also, on the SME side, on the small and medium enterprise segment, where we have a clear underrepresentation versus our total market share, we are focused on and having good development on. I think this is not, I think it's a healthy operation. We are improving, and we will continue to improve during 2020 and actually to defend and stabilize our market share. That's actually what we're doing. I think good done by the whole team in Finland.
Yeah. With regards to Norway, very encouraged by preliminary results of those price rises. Obviously, the market is, as per your Finland question, never to disrupt but certainly to defend our position. Let's see what that does to our churn numbers. I think the main thing when it comes to Norway is, as we said last quarter, it will take some time for this to turn around. One, we haven't quite lapsed the wholesale loss that ICE revenue was an impact of SEK 150 million on our revenue in the quarter. We're working on that. We've made some management changes in the organization. We're fixing fixed as Patrik Hofbauer just talked to in this slide, and that will take a bit of time.
We guided again for what is likely to be another soft EBITDA quarter for Norway, but hopefully slightly better on the service revenue because they are slightly easier comps.
Thank you.
Next question comes from Fredrik Lithell with SHB. Your line is open. Please go ahead.
Thank you for taking my questions as well. I have two of them. You have on earlier calls talked about that service revenue should be a bit slower both in Q2 and Q3, and to re-accelerate a little bit in Q4. I think, Eric, you alluded to that in your part of the presentation. If you could sort of stack up and rank the important part for the improved service revenue growth in Q4, that would be interesting to hear. Also, the capex, the lowered capex from SEK 14 billion to SEK 13 billion on a booked level versus your raised free cash flow, SEK 1 billion down and SEK 500 million up. Could you walk us through a little bit what movements you have that support your free cash flow raised guidance? That would be interesting. Thank you very much.
Yeah, good morning. I can start with a comment on the service revenue, and rightly we said that Q2 and Q3 will be a bit softer, but we then will see an improved situation in Q4. We do expect better growth in Q4 than in Q3, with especially Sweden to continue to look solid, and we expect more project-based revenues to step up here in Q4, and that is the main reason.
Yeah, it's mission critical r ight a s we said a few times.
Yeah. Yeah.
Yeah. On capex, it is very simple. We sort of never felt we're going to do the SEK 14 billion right when we guided for less. We're very happy with the progress that we've made as an organization on profitable growth, which ultimately drives our free cash flow growth. When you go through nine months of the year where you then feel is this the moment where we have that visibility, it's pretty clear when you do almost SEK 7 billion of free cash flow that an upgrade was necessary. Under the capex, we have good visibility for where we will land for the year and also where that will trend going forward. As per the first question, we got so very happy with how that goes through and yeah, let's see where we land for the full year when it comes to free cash flow.
If I may add a clarification, Frederic, we never planned to invest SEK 14 billion. It was always below, right? It's not a SEK 1 billion downgrade as such, but yeah.
Fair enough. Thanks.
Our next question comes from Erik Lindholm with SEB. Your line is open, please go ahead.
Good morning everyone. Maybe I'll follow up to Andrea's very clearly worded question. We're just thinking of the current trends here. It looks like you will exit the year at about 4.5% EBITDA growth rate, approximately, and the comparisons seem to get a lot tougher from Q1 and onwards. I'm just thinking of the outlook here for 2026 and beyond. I mean, you think you need to clearly accelerate cost savings to reach your target level, say CAGR 4% for between 2025 and 2027. Thank you.
I think the answer will be pretty much in line with Andrea's question. When we set the plan, the three year plan or the 2% and the 4% return related to EBITDA. As you know, we were clearly on that. This is a right sizing that we did with Project Sprint. It was the internal name on it that we did last year, the - 3,000 and we execute it on that. We need to continue to take out cost and that will be in every aspect, in every area of the cost base. This is work ongoing and I don't want to be more specific on how we will do that, but we will show you quarter by quarter that we are able to take out cost to defend because we are fully committed again to deliver on the 4% CAGR growth on EBITDA.
We need to because that's a combination of service revenue growth and cost out, be more efficient.
Yeah, maybe to add from my perspective is as time goes on now, having done 9 months, SEK 7 billion of free cash flow, the upgrade that you've seen gives us more confidence as a management team that we are on the right path to deliver what we promised. Not just the 2% service revenue and the 4% EBITDA in the coming years, but also the free cash flow that we've promised for 2027 of at least SEK 10 billion. The combination of profitable growth, good capex discipline leads to better free cash flow. The visibility that we have gives us confidence that we're on the right path to deliver on that promise of SEK 10 billion+ by 2027.
All right, thank you.
Our next question comes from Maurice Patrick with Barclays. Your line is open. Please go ahead.
Yeah, thanks guys for taking the question and the presentation for me. Just a question on Sweden, please. Yesterday it was interesting to hear Tele2 talking strongly about the increase in pricing or cost of the open fiber networks, their dissatisfaction about delays on regulation. Just curious for your insights in terms of these kind of key trends, the increase in wholesale pricing on open networks, upcoming regulatory changes and delays, and how that impacts you. I was intrigued that Tele2 sort of talked about how they were going to push fixed wireless access more, which sounded probably more like grabbing headlines than reality. Again, curious for your insights in terms of how you see that in the context. Also, you deliver a pretty solid broadband number this quarter and last. Thank you.
Yeah, thank you and good morning. Coming back then to the access cost for local networks, we have seen the higher cost for the local network access for several years. It's nothing new, and that is driven basically by ourselves growing as a service provider in these local networks and then also higher access prices. We haven't seen any recent increase; this has been going on for a while, so I don't know exactly what happened there. Also, on our own networks we have made very modest increases in our COMOP business, a couple of percentage points only. I don't really recognize the whole situation as a new thing. This has been going on for many years. Regulation, regulation, yeah, regulation has been p ostponed as you know again.
Yeah.
We'll see what happens when we eventually get there. I think you're right, that's probably what brought the topic up this quarter.
Yeah, maybe overall on Sweden we are incredibly happy with the performance there as you saw, very good service revenue growth perspective of even more service revenue than Q4 as we indicated, very strong cost control leading to good EBITDA growth. We hear what others are saying, but we're very happy with our developments in the Swedish market.
I think you also mentioned the broadband intake, Maurice. It's good work over a couple of quarters as we mentioned. This is some delayed registrations from last quarter as well. Good anti-churn measures after the price increases we did in the beginning of the year. That's working, and overall we're happy with that.
TV continues to perform well and not a surprise. I mean we have the best product in the market, and obviously customers are appreciating it. For the fourth year now, we have got the best feedback from the customer service on TV. All in all, happy with the performance. Remember that we have seen more household perspective on the consumer market in Sweden rather than looking each for the products, because our easiest win here is actually to sell more products to existing customers, and that is actually paying off in this strategy.
Thanks, guys.
Our next question comes from Ajay Soni with JP Morgan. Your line is open. Please go ahead.
Hi, guys. Thanks for taking the question. My one is just around leverage and shareholder return. Obviously you're below your target at the moment. We have some acquisitions coming maybe in the next few months, but it feels like you'll still end up below your target range of 2 x- 2.5 x. Do you see an opportunity to maybe distribute some of the proceeds from the TV and Media business sale as buybacks or extraordinary returns? If so, when would you approach this decision with the board? Thank you.
Thank you. Good question. We're very happy with the direction of travel. As a team, we've worked very hard because it's one of the building blocks of the value creation plan is having a healthier balance sheet. One, because we pay less interest than on the debt that we have outstanding, which helps our free cash flow growth, which is the other pillar of our value creation. That's a benefit from that. Secondly, we are a simpler organization to run based on all these divestments. We're very happy with the progress that we're making. We have that final building block which is doing, as I said earlier today, coming right on progressively growing dividend. Next year is when we'll come back to that. The beginning of the year is when we will set out our store with regards to the guidance is when we have our conversations with the board.
We will come back to that. Maybe the last point is we obviously also use our balance sheet to strengthen our business. We've done the announcement of Bredband2, so it's important for us that we have the flexibility to be able to do that as well. We know it's an important pillar of our value creation plan and we'll come back to that at the beginning of next year.
Okay, thanks.
Our next question comes from Abhilash Mahapatra from BNP Paribas. Your line is open. Please go ahead. Abhilash, star six to unmute. Sorry, apologies. Thank you.
Hi, good morning everyone and thanks for taking my questions. I had a question, please. On Finland, where you've delivered strong EBITDA improvement over the last three to four quarters, you're now talking about how you're seeing underlying improvements in your commercial trends as well. Could you maybe share some thoughts on how you see your Finnish profitability evolving over the next couple of years, say? Just a quick clarification around the Norway capex. Sorry if I missed this. Does this at all change your thinking around the FY 2027 free cash flow target of SEK 10 billion +, or is that reflected in this?
I can start with a later one with the capex. No, it's reflected in the figures and will not impact our 2027 target. To be super clear, it's in the envelope of that. Then Finland.
Yeah, with Finland maybe you step back a big part and we talked about it today in the voiceover as well of the analyst presentation, which is this margin expansion was a very important part of what we talked about at the investor update last year for all countries. If you look at the Q3 results, you see that apart from Norway because of the loss of the wholesale contract, all other countries you see the margin expansion coming through. What is that? It is our discipline around the programs of doing more with fewer people, but also the ancillary cost that we have. We have a very, very clear plan and that underpins that delta between the 2% service revenue and the 4% EBITDA growth that Patrik mentioned earlier in his answer to the first question. That is still very, very high on the agenda.
You should expect more margin expansion, including in a market like Finland in the coming years.
Can I just add also Finland. To build on what said, don't also forget to look into the ARPU development that we have in, which is a 4% up on the mobile postpaid, which is also very positive. That has been driving the agenda to run price increases, but also better mix in the portfolio. All these activities are actually paying off at the moment, but we're still a way to go to be where we want to be in Finland, to be clear.
That's great, thank you.
Our next question comes from Keval Khiroya with Deutsche Bank. Your line is open. Please go ahead.
Thank you. I've got two questions, please. At the CMD, you showed a target for mission critical revenues to more than double from 2023 to 2027. You've been quite clear on this as a source of support for Q4, but can you comment on how we should think about the mission critical growth in 2026 compared to the growth in 2025? It's obviously a bit difficult for us to model. Secondly, on Norway, you've talked quite clearly about the moving parts, but can you comment on when you actually expect Norway to stabilize EBITDA? Thanks.
I'm not sure I understood the first question, but I can give you, I mean, we have a clear, I mean, we said it will double, rightly as you said, you know, for the coming years, and we see that it's coming in now to our books and orders, and also that's the reason why we will see a comfortable increase in Q4 in Sweden. That's part of it, and this will continue, but these revenues are a bit more lumpy. We will see it continue in the coming years as well. We have not been explicit more than said that we'll be double from where we came from, and we will still stand with our we are delivering on what we have said and on the expectations. No surprises coming in.
Yeah. With regards to Norway and sort of the negative EBITDA that we've seen, we've guided already for that for Q4 as you heard earlier today. That will take a couple of quarters. We're still not quite out of the impact of the wholesale revenue. We've seen some increase in energy cost there. We typically have salary inflation in our countries as well that we have to work with. We do see great opportunities to turn around that business, fixing fixed, making sure we stem the losses. We have a mobile TV is back on after the outage that we had, but it will take us a couple of quarters. As we said last at the half year results, we need a bit of patience before we also from an EBITDA perspective turn around this business.
That's clear. Thank you.
Our next question comes from Viktor Högberg with Danske Bank. Your line is open. Please go ahead.
Good morning. You asked a question on a new free cash flow guide. Just a clarification, maybe, given the assumption of SEK 650 million in spectrum capex annually included in the guide for this year, would you say that you still expect the real free cash flow, that is including the higher spectrum capex, to still cover the dividend this year as we're getting close to the FY results? Just want to make sure that we're all speaking the same language. That's the first question.
Thanks Viktor. It's Eric. Here at IR we don't guide for free cash flow including the real spectrum cost, as you might understand, simply because we're not able or allowed to speak about spectrum capex ahead of the auction. We have to stick to the normalized spectrum when we talk about free cash flow guidance. That's the case.
SEK 650 million.
Maybe it's worthwhile to add a comment to that. SEK 650 million is kind of a rough average for what it's been over a decade. Last year was lower than SEK 650 million. This year we know it will be higher because we have already the SEK 780 million from the 2023 auction to pay. Plus, let's see, about SEK 1.8 billion in Sweden next year. We don't have any big auctions coming up, so it goes up and down, but yeah, that's where we are.
Okay, fair enough. On the second question, just another clarification. Maybe if you were talking about the group or just Norway on Q4 group, EBITDA growth, the trend being in line with Q3, was that for the group or for Norway? Below 5%, that is for Q4.
Eric said in his presentation that the EBITDA growth for the group is expected to be roughly the same in Q4 as in Q3. That's for the group and for Norway. We expect EBITDA improvement to take a couple of quarters. As Eric said, we need some more patience for Norway specifically.
Okay, that's great. Thank you.
Thank you.
Our final question comes from Siyi He with Citigroup. Your line is open. Please go ahead. Siyi He, your line is open.
Hello, can you hear me now?
Yes. We can hear you, but w e don't get any questions.
Okay, great, thank you. Okay.
Now, there you are.
Thank you. Thank you.
Good morning.
My first question is on Finland. I mean the ARPU development is quite encouraging. I'm just wondering if you can share with us how you think about your price increase strategy because I think you so far haven't really followed the security added tariff changes that were put through by two of your competitors in Finland. My second question is on service revenue growth in Sweden, and I just want to ask about how we think about 2026 and 2027 given that the price is quite well, have lower legacy drags, and the mid-term critical revenues should also come through. Do you think it's fair to assume that the top trend is next year and we have to could be better than what we have witnessed this year so far? Thank you.
I can take the first question on Finland. I'm a bit surprised that we get the question all over again regarding this, the package, you know, the security package. Look, back in Finland we have been driving the price increase raised in the value creation agenda for many, many years. Remember our position. We are the number three mobile operator in the market and if you look at the ARPU levels they are very similar to each other and we should be the challenger in the market, not the responsible leader in the market. Look at our positions. I think we are looking into different ways of driving price increases, that is ARPU increases. We don't need to follow what our competitors are doing all the time.
We have our own agenda that we are running and we are looking into to make sure that we continue to grow and take the, and defend the position that we have in the market and that you will see going forward as well. I don't want to go into comment on every package and price, etc., you know, so we have our agenda, we are running that, we are number three in the market. We should be the challenger. We have been too much more too responsible as a number three player and acting like we were the incumbent almost in Finland or the leader. I think we are well positioned. We have done good quarter and good improvement during the year and that will continue. I expect that will continue in the next year as well.
To add a little bit, I think that our main way to drive ARPU is probably not that different from the competition. We look at the subscriber base, cohort by cohort. As certain cohorts exit a certain tariff or contract, then we can move them up to a higher value, higher price level, and that's how you work through the subscriber base with different prices, and that's giving the results you can see there. I think the 4% is roughly in line with the competition, even though we don't do exactly the same thing on security add-ons.
Yeah. With regards to Sweden or specifically service revenue in Sweden, very encouraged by what we saw in Q3, the first nine months performance and what we're expecting for the full year. A little bit like our answer on capex, that's not something that changes overnight. Right. When you have certain momentum, and clearly we're guiding for a stronger Q4 driven by what we're doing in mission critical particularly, but also just the underlying business in broadband, in TV, the convergence play is really working well for us, and on top of that some price increases. We expect that momentum to continue. Said in a slightly different way, if you think about a medium term guidance, the 2% and the 4% that would not be possible without Sweden delivering that. Right. Because it's roughly half of our business.
Again, we feel comfortable with that medium term guidance and we're very encouraged by the performance that we're seeing in Sweden.
That's very clear. Thank you.
There are no further questions.
All right, thank you very much everybody for calling in. Many good questions, and we look forward to continuing the discussions over the next quarter. Thank you and goodbye.
Thank you.