Welcome to Telia Company Q3 2026 report presentation. I will now hand over to Head of Investor Relations, Erik Strandin Pers . Please go ahead.
Thank you, and welcome, everyone, to the call. We have, as usual, CEO Patrik Hofbauer and CFO Eric Hageman here, and we will do the presentation and then Q&A. We will try to finish this call in 50 minutes today, 50 minutes. So let us try to be extra fast and efficient today. So think about an efficient question for the Q&A when we come to that. Patrik, please go ahead.
Thank you, Erik, and good morning, everyone. I am glad to see that we have maintained good momentum in the third quarter, both operationally and financially. We are growing our core business. Customer trends remain healthy, and we continue to simplify Telia and move responsibility closer to our customers. So let me start with the progress we made during the quarter. First, regarding our customers. So customer satisfaction develops positively, and we continue to see net growth in our customer bases. In Sweden, we have been selected as the main supplier for the Swedish Emergency Communication Network, which further demonstrates Telia's relevance in secure and mission-critical connectivity. Second, regarding simplification and strategic development, we are on a journey to move towards a more localized company with greater accountability and decision-making closer to our customers.
In Q3, we have taken another step in that direction, which I will come back to later in the presentation. We were also very proud to be the first telco ever to reach the best score, 10 out of 10, in the Global Child Forum Benchmark, as protection of children in our digital environments is a key focus area for us. Third, regarding portfolio management, we continue to sharpen the asset portfolio to drive growth in our core business. We make small bolt-on acquisitions, like the 6,000 fiber households that we agreed to acquire in Norway this quarter. By making selected divestments to simplify the business. In the quarter, we announced the divestment in our Contact Center-as-a-Service platform, ACE, to a specialist partner who is better equipped to develop the platform going forward. Fourth, regarding technology, which is important for secure and resilient services.
During the quarter, we launched an enhanced caller ID service in Finland and a mobile DNS firewall service in several countries. We are also expanding commercial 5G standalone capabilities across our footprint for safer and more reliable connectivity, better protection against digital threats, and as a platform for new services that can take advantages of the full potential of 5G. We continue to simplify our technology environment by modernizing and closing legacy systems, implementing new consolidated ways of working with partners and vendors, and improving delivery accuracy for new functions and features for customers. Turning to the financial highlights. Service revenue growth accelerated to 3.3%, supported by strength in TV, mission-critical, and non-connectivity project revenue. Sweden and Lithuania both remained solid. EBITDA increased by 2.9%. This was somewhat stronger than we have anticipated, mainly due to lower cost.
As flagged in connection to Q2, Sweden slowed temporarily in the quarter, and we expect growth there to re-accelerate again in Q4. CapEx remains well controlled at SEK 12.6 billion on a rolling 12-month basis, below our full-year outlook of less than SEK 13 billion. Free cash flow was at SEK 3.7 billion in the quarter, taking us to SEK 7.8 billion year to date. The leverage was at 2 x at the very bottom end of our targeted range. Based on the performance in the first nine months, we can now upgrade our full-year outlook for adjusted EBITDA and free cash flow. Moving to Sweden, where commercial performance remained healthy. We continue to grow our consumer business, having added more than 100,000 mobile customers and more than 150,000 TV customers since the start of last year. Consumer ARPUs are also growing in both mobile and TV.
Broadband ARPU remains lower than last year, but as you saw in the numbers this morning, it has started to tick up again in absolute terms. This month, we are proud that Telia Enterprise and Fello were named by SKI, Swedish Quality Index, as the mobile operators with the highest customer satisfaction in Sweden and to have been selected as the main supplier for the Swedish Emergency Communication Networks, as I mentioned. Service revenue growth accelerated to 4.7%, supported by elevated project and non-connectivity revenue. Even adjusting for this and for copper legacy revenue, the business is growing by a healthy 4%. EBITDA grew 2.1%, as expected. This was a temporary slowdown compared with recent quarters, and we expect growth to re-accelerate in Q4. Cash generation is strong, with EBITDA less CapEx continue to move higher on a rolling 12-months basis.
Let me spend a moment on convergence, because it remains central to our consumer strategy in Sweden. As you can see, the convergence ratio is on a consistent upward trajectory, and we now have about 1.2 million converged consumer customers, equal to around 55% of the base. This provides a lot of stickiness, and every additional services added reduces churn by about 50%. At the same time, average revenue per household continues to increase by around 3%, and the underlying economics remain compelling. Household churn falls materially as customers add more Telia services. We continue to see convergence as an important way to deepen the customer relationship, improve loyalty, and create additional value from the households over time. Moving to Finland, where the competitive environment in mobile remains challenging and our focus continued to be on customer retention, loyalty, and profitability rather than chasing volume.
Service revenue was flat as lower mobile revenue was compensated for by growth in fixed, where both the consumer and the business segments contributed to the increase, the latter largely due to non-connectivity revenue. At the same time, EBITDA remained in growth territory supported by good cost control. This shows that the work to simplify the business and improve its cost structure continues to have an effect even in a difficult revenue environment. We have also completed the non-core ICT divestment, further sharpening Finland's focus. There is more work that needs to be done to improve the top line, particularly in mobile, but we continue to take the right structural actions. Moving west to Norway, where the mobile customer momentum improved further. ARPU growth remained solid, supported by pricing, and fixed revenue continued to perform strongly.
We expect trends to continue in the right direction, helped by our new product portfolio just announced. Furthermore, we have continued to improve our NPS, and our mobile brand OneCall was ranked number one by EPSI in terms of consumer mobile customer satisfaction. Service revenue remained in a positive territory at 1.8%, while EBITDA returned to a slight growth. This marks the first EBITDA growth in nine quarters following the negative impact from the lost wholesale contract. Importantly, the operational cash flow trend also improved. While there is much more to do, the business has made meaningful progress compared with where we were a year ago. In Norway, we are also building a stronger mobile network, which I will touch on briefly on the next page. The rationale for this remains compelling. We are creating an efficient and future-proofed mobile network.
Coverage will improve in rural areas and urban areas alike, along roads and railways, and where the cabins are located. Network capacity will increase. It will increase competition and consumer choice and make Norway's digital infrastructure even more resilient. As you remember, Telia and ice will continue to operate our independent core networks and compete in the market. But the radio network will be run by a joint operation with its own organization, which will create substantial cost and CapEx synergies. Regulatory discussions are still ongoing, so we cannot give you an exact timeline, but operations are planned to start at the beginning of 2027, with traffic migration expected to be completed before the end of that year. The network build-out will continue through 2030. We will consolidate 50% of the joint operations P&L, cash flow, and balance sheet in our accounts.
The near-term service revenue and EBITDA impact is expected to be limited, while over time, we expect significant cost and CapEx synergies. The current estimate is for annual benefits to Telia of around NOK 300 million- NOK 400 million from 2029 onwards. Moving on to Lithuania, which continues to deliver consistent results, including positive ARPU development across the main products. Mobile customer growth remained healthy, and service revenue grew 6.4%, with good development across both mobile and fixed. The broadband customer base saw a slight decline, but we expect new fiber regulation, which we believe can help create better momentum in 2027. Telia Lithuania has furthermore been selected to provide critical communications, connectivity, and cybersecurity infrastructure for Lithuania's presidency of the Council of the European Union. EBITDA grew 7.9%, showing continued healthy conversions to top-line growth into earnings.
Estonia, where financial trends remain stable with service revenue growth of 2.8% and EBITDA increase of 4.3%. ARPU development remained positive across mobile, broadband, and TV, and the mobile postpaid base increased during the quarter. We have launched new security packages, one for both mobile and home services this year, and see strong demand. This quarter, we also launched a new AI assistant in our customer service, and it has successfully reduced responding times and received positive customer feedback. Our fiber rollout program continued. We contributed to a 1,000 growth to our fiber subscriber base, partly offsetting the decline in copper connections. With that, I hand over to Eric, who will take you through the financial development in more detail.
Thank you, Patrik. Let me take you through the financial development in the quarter, starting as usual with service revenue and EBITDA. Starting with service revenue on the left, growth accelerated further to 3.3% in Q3 compared to 2.8% in the second quarter. The strongest contribution came again from Sweden, that continued to see a solid consumer segment development and a somewhat elevated level of non-connectivity-based revenues. This was also the case for Finland this quarter. This type of revenue is quite lumpy by nature, and some of the deliveries we made this quarter were originally expected to be delivered in Q4 but came a bit earlier than anticipated. As a result, we expect lower service revenue growth in Q4 compared to our year-to-date growth of 2.8%. As such, we keep our full year guidance unchanged at around 2%.
Turning now to EBITDA, which grew 2.9% in the third quarter. This was, as we flagged three months ago, a slight slowdown from the level of growth we saw in the previous quarters. Having noted that, we actually did come out somewhat stronger compared to what we originally expected, mainly driven by lower costs. Year to date, EBITDA growth is 3.5%, and as previously communicated, we expect this to re-accelerate in Q4. Therefore, we are today upgrading our full year EBITDA growth guidance from around 3% to between 3% and 4%. Moving now to OpEx and CapEx. Starting on the left, OpEx declined 2.6% on the back of relatively stable resource cost, lower cost for marketing, and less spend on other, which includes, for example, better than expected levels of bad debt across the group.
OpEx as a percentage of service revenue continued to decline, coming down to 26.6% compared to 28.2% in the corresponding quarter last year. Moving to the middle graph, you can see that CapEx in absolute terms was pretty much flat at SEK 12.6 billion on a rolling 12-month basis, comfortably below our full year outlook of less than SEK 13 billion. EBITDA less CapEx, as a simple proxy for cash flow generation, was up again, now at SEK 20.3 billion. Rolling 12-month cash conversion was up 20 basis points to around 62%. Finally, on the far right, our return on capital employed reached 10.3%, up 100 basis points compared to 9.3% a year ago, supported by our profitable growth and continued discipline on our capital allocation. Turning to free cash flow.
Free cash flow in the third quarter amounted to SEK 3.7 billion , compared to SEK 2.9 billion in the same quarter last year, taking free cash flow to SEK 7.8 billion for the first nine months of the year. The first major contribution to this circa SEK 900 million year-on-year increase comes from profitable growth, with EBITDA up SEK 400 million. CapEx had an equally positive impact of circa SEK 400 million, as last year we saw some higher cash CapEx. Working capital also made a minor positive contribution in Q3 compared to last year. Finally, we also saw a timing effect between quarters regarding dividends related to our Telco ownership in Latvia, which helped a little bit this quarter. Overall, free cash flow again developed very well in Q3.
In combination with a strong start to the year, we have nudged our free cash flow outlook for the year slightly up to at least SEK 9 billion. Moving now to the balance sheet. With net debt down 1.4 billion and a rolling 12-month EBITDA up 500 million in the quarter versus Q2 of this year, leverage decreased from 2.06 x at the end of Q2 to 2x at the end of Q3, putting us at the very bottom end of a targeted range of 2x- 2.5 x. Our free cash flow of SEK 3.7 billion more than covered the dividend of SEK 2 billion we paid this quarter. Overall, our balance sheet remains strong and provides us with good financial flexibility. Finally, let me put the quarter into context of our value creation agenda.
First, rolling 12-month free cash flow per share has reached SEK 2.61 , more than covering our current yearly dividend of SEK 2.05 per share. Second, we remain active in the market as we continue to see opportunities to further optimize our portfolio. In this quarter through transactions in Sweden and Finland, where we have divested part of operations to become more efficient, and Norway, where we signed an agreement to acquire 6,000 fiber customers from GlobalConnect. Third, leverage is at the lower end of our target range, as I just explained. Finally, we paid another quarterly dividend of just over SEK 0.50 per share. Overall, we continue to make good progress across all our pillars of our value creation agenda. In terms of cash generation, portfolio management, balance sheet strength, and shareholder returns. With that, I hand back to Patrik.
Thank you, Eric. Let me now turn to an important next step in our simplification journey, which we announced on October 12th. Over the last couple of years, we have progressively moved Telia towards a customer-focused operating model. We now intend to take that model further. The principle is simple: put more responsibility and resources closer to our customers, reduce unnecessary coordination, and make it easier to make decisions quickly. Subject to union negotiations, we therefore intend to shift further resources from group to our countries and simplify the group structure. At the same time, we intend to reduce approximately 900 positions across Telia. The target is approximately SEK 1 billion of annual gross savings, with actions expected to have a positive impact on free cash flow in 2027 and reach the full run rate benefit from 2028. This is not a simplification for its own sake.
It is about creating a company with clearer accountability, fewer interfaces, and greater speed of execution. Let me now finish by summarizing the quarter. Overall, we continue to make good progress. Customer trends remain healthy. Service revenue growth was strong, and we continue to execute on our simplification and portfolio management. Financially, we are tracking well against our plan. After nine months, both service revenue and EBITDA growth are ahead of the respective full-year outlook levels, while capital discipline and free cash flow generation remains strong. Given this, we are comfortable in upgrading our full-year outlooks for EBITDA and free cash flow. At the same time, we remain focused on the longer term. The actions we are taking will support sustainable growth in revenue and cash flow while enabling us to continue creating value for our customers and meeting their evolving needs.
We are well on track on our midterm ambitions, including free cash flow of more than SEK 10 billion in 2027. With that, we will open up for questions. Thank you.
To ask a question, press star five on your telephone to enter the queue. When it is your turn to speak, press star six to unmute your microphone. The first question comes from Ondrej Cabejsek at UBS. Please go ahead.
Hello, can you hear me?
Now we can hear you.
Yes.
Yes. Good morning. Thank you for the presentation. I wanted to focus on the RAN sharing slide that you have, please. Thank you for providing more clarity. I guess one straightforward question is that, given that there is regulatory discussion ongoing, does this mean that you as probably the new largest network in Norway, expect to be somehow regulated with some kind of wholesale obligations the same way that, I guess Telenor is today? That is question number one. Then question number two, on the free cash flow effects, are we correct to assume that there are some equalization payments from the smaller partner in 2027, 2028, which look pretty material. So the whole thing is free cash flow accretive from 2027 already, despite some of these integration or CapEx going into this initially.
What do you mean by short-term impact on service revenue and EBITDA if you could please clarify. Thank you very much.
Good morning. It is Patrik. I can take the first question. So we are now in dialogue with the regulatory environment in Norway. We cannot specifically say what it is. It is too early. But we are in good dialogue, and we still think that it will be possible for us and ice to move on with this one because again, we are building a stronger network in Norway which improve the digital environment overall and the infrastructure in Norway. But it is a bit early to say what it will be about. Thank you.
And on the impact or the financial impact, if you will, as you can see on the slide, we are not going into details of exactly what those blue arrows are, greenish-bluish arrows are, because that is part of a non-public business agreement that we have. But I think the orange ones are clearly indicating what it will do for us in the short or medium term. So in essence, negative in 2027 and to a small extent in 2028 because you have implementation cost, and then starting to reap the benefits from 2029 onwards to the tune of, at the moment we have said circa NOK 300 million - NOK 400 million .
Thank you. Eric, can you please explain the impact on service revenues and EBITDA? What is happening there?
Yeah, we will come back to that at a later stage. As Patrik just said, let us make sure we get through the conversations with the competition authority, which we hope to bring to a good conclusion. And then after that, we are able to tell you a little bit more where we have landed. But we felt that something that we announced last year was important to give a bit more detail, that we have, that we have agreed also with a partner. So we thought it was important to give you a bit of clarity. Also because we are starting to get closer to 2027, and as you can see on this page, this has an impact on that 2027 free cash flow number.
Great. Thank you both.
The next question comes from Derek Laliberté at ABG Sundal Collier. Please go ahead.
Yes. Good morning, and thank you. I have two questions. First, on Sweden, service revenue growth accelerated to 4.7%, there you mentioned it was helped by business solutions and other services. Just wondering how much of that strength was simply Q4 revenue being pulled into Q3, and what the underlying growth would have looked like excluding that timing effect.
Yeah, I can start first. Good morning, it is Patrik here. So, as we said, we were a bit surprised. So the Q3 was a bit better than expected, and one of the reasons is that we got some orders or businesses in mainly non-connectivity related. So if we exclude those non-connectivity related, we will be at around 4% in a quarter. So that is basically it.
Ah, perfect. That is very clear. Then on the free cash flow here, obviously very strong at SEK 3.7 billion. You mentioned it was supported by working capital and lower cash CapEx. How much of that would you say is expected to reverse in Q4? And what should we assume for a year on the working capital here?
Yeah, we are obviously not guiding on a quarter-by-quarter basis, but I think you should see it in positive light that we have nudged up that free cash flow outlook to at least or above SEK 9 billion. There is a bit of phasing. There always is. But if you look at the rolling 12 months in terms of CapEx, we feel very confident where this is heading, and I think that gave us also the confidence to upgrade to free cash flow today. I think if you look at versus last year or the expectations we have for the year, there is various elements that contributed. Paying less tax, paying less interest, a bit better working capital inflow. But it starts with a much stronger EBITDA that we have seen and our expectations for Q4.
I think we feel comfortable with this upgrade that we have done today on the back of a strong start to the year with SEK 7.8 billion.
All right. That is very clear. Thank you.
The next question comes from Maurice Patrick at Barclays. Please go ahead.
Yeah. Hi, guys. Maurice here. Thanks for taking the call and taking the questions. Just one question really, Eric, on the balance sheet and shareholder returns, if I may. I ask it because you mentioned it twice on the call actually, that you're at the very low end of your target leverage range. You also highlighted free cash flow more than the dividend. I think you mentioned that twice as well. It's interesting talking to Tele2 yesterday, they were asked about special dividends and shareholder returns, and they talked about wanting to maintain a cautious balance sheet given the financing environment. But you're clearly at a point where you're below your midterm guidance range on leverage. You'll have a CMD, I think, next year to talk about the outlook to 2030.
It's probably premature to talk about your total shareholder return strategy for the next three years, but very curious to hear your thoughts in terms of longer term balance sheet positioning, use of cash flow, and how you think about that for the years ahead. Thank you.
Yeah, very good question, and I'm sure in the coming days when we're on the road, we will get it quite regularly. I think it's part of the hard work that we've put in, right? It's the consequence of the strong results. So, I think working backwards, you're absolutely right. There is a CMD that we're planning to have in H1 next year, and I think this is when we will set out our store on all these elements, because that's also what we did in September 2024. So we feel that we are getting in a good position, both from a balance sheet perspective. Of course, our colleagues here in Sweden are right, given the current macro climate, increasing interest rates, being at the lower end has its advantages because one will pay more interest, right? So being at the lower end is a good thing.
So, give us some time to come back to that, and no doubt, at the beginning of next year, we will talk about the dividend because that's when you prepare your documentation for the AGM. Then followed by the CMD, where you should expect us to talk about capital allocation in general and shareholder remuneration specifically.
Thanks, Eric.
The next question comes from Andrew Lee at Goldman Sachs. Please go ahead.
Good morning, everyone. I had two questions. One on cost-cutting and the announcement you made a couple of weeks ago, and then second on the top line. Just on the cost-cutting, I guess your share price response on the day of that announcement was muted because people were trying to gauge how much of that was incremental. Could you talk about how much of that cost-cutting program you have just announced is incremental versus what you expected to deliver when you set your 2027 guidance? Any color on where it is coming from would be helpful, given that if we look at the 2027 outlook now, you have got almost SEK 1 billion of extra costs that you are taking on. SEK 600 million of restructuring and SEK 300 million -SEK 400 million of RAN sharing costs.
It looks like with an unchanged free cash flow guide, you have essentially raised your underlying free cash flow guidance by SEK 1 billion in 2027. Just a bit more color around what is going on incrementally would be helpful there. Then, just secondly, just more simply on the top line, you have kept your top-line guidance of around 2% for the full year this year. I think that implies basically flat to declining top line in the fourth quarter. Could you explain why that is? What is getting materially worse given, I am guessing, Finland should be getting better in the fourth quarter. Thank you.
Thank you, Andrew. I can start with the top line. We do not expect a negative development. We normally do not guide as per quarter. We see that there were some business that came in a bit earlier than expected, came in Q3 instead of Q4, and then we also have tough comps in Q4 as well. That is the reason why we maintained basically the outlook for the full 2026 full year outlook. So, a bit softer expected, but not that dramatic. Then on the cost-cutting that we. Remember now, this is a continuation of what we have started before. Building a simpler, faster, more efficient Telia. We see, of course, the big impact will come in 2028. We will have some impact in 2027, but the majority of the impact is in 2028 and onwards. That is the reason why we are doing this change.
We want just to be sharper and simpler in the way we operate. Then maybe, Eric, you can say something about the impact for 2027 specifically. Give your question, Andrew.
Yeah, we obviously had a discussion about it. We set out a clear story of our free cash flow development in September 2024, and you do not want to change that. Obviously, for 2026 it is slightly different because there are some put and takes. We see the negative impact of the RAN sharing. There is restructuring cost for the project that we announced on the 12th of October, for which, as Patrik said, we will get the full benefit next year. So we had a conversation as in, "Is this the moment to do it or not?" And we felt, not yet. But I think your conclusion is right. Does it underlying mean that it is a free cash flow upgrade? And I guess in essence it is.
Thank you. That is clear.
The next question comes from Andreas Joelsson at DNB Carnegie. Please go ahead.
Good morning, everyone. Just to follow up on the top line and perhaps more specifically, mobile in the Nordics. You have some growth in the Swedish market, but you are still in decline in Finland and Norway. Just interested to hear your thoughts on how to turn that trend and maybe in connection to that, also the convergence that you mentioned in Sweden. Does that mean that you are more looking at the total service revenue package, so to say, rather than looking at trends for various sub-products in your various markets? Thanks.
Morning, Andreas. I can start to answer. First of all, yes, on your last comment or question, that we see it from a household perspective much more. The reason is very simple. Around 50% of the Swedish household has at least one service from us. Adding more service to existing customers is the most important play for us in the consumer market. Correct, and we see that the household ARPU is growing by around 3%. It is very healthy numbers. Then, of course, we also look into the different products and see how we can move them, because they are, of course, included in the packages. Let me say it like that. We see some improvements in Sweden. But also in Norway, we see growth in the customer base, which is the best for many years now in mobile, especially in consumer side.
We see some good movements, overall trends there. Where we do not see the same good trends is in Finland, obviously, where we still have a lot to do and quite tough situation, especially on the consumer side. There, we have not seen the turnaround yet, even though we saw some softer activities in the market in September. But let us see now into Q4. But still we think we have a way to go there in Finland to turn the needle there, turn it around.
Perfect. Thank you.
The next question comes from Fredrik Lithell at Handelsbanken. Please go ahead.
Yes. Thank you for taking my question as well. Could we stay with Finland a little bit? If you could talk a little bit more about the market picture and how the competitive pressure is developing through Q3. Also, if you could add into that on the corporate side, what you see there. Thank you.
Yes. If you look at Finland overall, it is a quite tough GDP development overall in Finland. Then you look into the different areas. In consumer side, I think you all know what happened last year in Q4 with the intense competition. It is eased up a little bit, but some MNOs are still quite aggressive in the market with gift vouchers, et cetera. We have seen a bit maybe softness of that one towards the end of the quarter in Q3, and let us see how the market will react. For us, it is very important we focus on our customer base and to make sure that we get more value out of the base and continue to improve the customer experience. So that is our short-term focus in Finland.
But of course, we are demanded, and we need to rely that the market is improving and repairing itself, going forward from where we are coming from. But so far, we have not seen any big trend shifts apart from a bit softer towards the end of Q3. So let us hope and see that the market is improving. On the B2B side, I think it is fairly unchanged. It is quite tough. We have some good wins there, but overall, it is quite tough market situation. But that is the same for all markets. I think all the public tenders, they tend to be quite aggressive overall. So that is the overall picture for the market.
Where we see some good development is on the SME side, which we have been very clear on for many years, that we want to grow our share on the SME side, and that growth we see is coming in. So that is very good for us. And that is valid both for Finland and for Sweden. I hope you answered your questions, Fredrik.
Yeah.
Thank you.
Yes, absolutely. Can I just follow up there on the B2B in Finland? Do you participate on the data center side that is developing there, and also on the mission-critical type of services? Could you just put a word on that? Thanks.
Yes, we are. Yes on both. We, of course, are looking into all opportunities. There are many potential data centers builds in Finland, and of course, we are looking into that and we are participating in those. Then on the mission-critical side, it is given for us to be there also in Finland as we are in Sweden. But we haven't seen the big growth coming in from mission-critical yet in Finland as we have seen in Sweden. But we are, of course, well-positioned to deliver to all the mission-critical society parts in Finland.
Clear. Thank you.
The next question comes from Ajay Soni at JPMorgan . Please go ahead.
Hi, guys. I hope you can hear me. The first question I have got is on Sweden and the no-frills segment, which has been called out as being a bit aggressive. You see that mobile ARPU speaks for yourselves on - 1% this quarter, pretty similar to Q2. Are you seeing a drag on mobile ARPUs from the no-frills segment, and how are you positioning yourself here? The second one was just a clarification on the cost-cutting for 2027. I get the gross annual saving of around SEK 1 billion. Do you think these mostly fall within your 2027 EBITDA numbers? If so, would you expect an acceleration in 2027 EBITDA versus 2026? Thank you.
Yes. I can answer the first question on ARPU. When it comes to ARPU in Sweden, in the consumer side, we are actually performing quite well. It is majority driven of B2B, where we have these big tenders from enterprises and also governmental bodies that do public tenders, and then the price tend to go very aggressive. We have decided not to participate in those aggressive tenders. So we have stepped out from many of the potential businesses because we just think the prices are just too low, so that we do not participate. That is, of course, impacting the ARPU, also reflecting in the ARPU for that side. In B2C, actually, we are increasing slightly, so that is positive.
Also on the SME side, I mentioned SME in the previous question, but also on the SME, we see an increase, but where we can compensate also by volume, by taking shares. That is positive.
On the cost-cutting, it is quite simple. For a while, we guided for a CAGR of 4% EBITDA for this year specifically. We are now saying between 3% and 4%. If you would multiply that by our SEK 30 billion plus of EBITDA annually, there is about SEK 1 billion of EBITDA growth, give or take in a year, and I think that is also what we expect for next year. The best way to think about the program that we announced on October 12 is securing the uplift of that in our EBITDA growth for next year, which obviously then also helps our free cash flow uplift. Hence, the answer to the previous question. It was not that we did an upgrade, but it secures the development for our profitable growth for 2027, 2028, and beyond.
Thank you.
The next question comes from Ulrich Rathe at Bernstein. Please go ahead. Ulrich Rathe, please unmute your microphone via star six. The next question comes from Viktor Högberg at Danske Bank. Please go ahead.
Yes, good morning. [inaudible] with Swedish Broadband. Could you just elaborate on your thoughts on the current market now ahead of the upcoming regulation? Your plans that you can disclose, how to mitigate when others might get access to your home, so to say, sometime next year. Thank you.
Yes. Thank you, Viktor. As a reminder, we are already regulated. We are already providing access to others who sell on our infrastructure. Once the regulation eventually sets in, we expect it to level the playing field so we can get more access to other local networks. It remains to be seen what effects that will have. We think that point will have a relatively neutral impact to us, but let's see. It might be an opportunity.
The next question comes from Ulrich Rathe at Bernstein. Please go ahead. The next question comes from Nick Lyall at Berenberg. Please go ahead.
Hello, guys. I hope you can hear me.
Yes.
Great. Good. It was just a quick one. On the broadband numbers, please. The ARPU dilution is obviously quite big from the Bredband2 acquisition, Eric. Could you maybe tell us what the underlying numbers look like? We are hearing a lot about very fierce competition in open networks. Could you give us a bit of an update on what ARPUs are doing on an underlying basis for broadband, please, in Sweden? Just a second, just in a couple of numbers. Is it possible to give us the contribution of Bredband2 on revenue and EBITDA? Also, I think, Patrik, you gave us just now the contribution of the extra revenue in Sweden as well of about 0.7%. Any cost associated with that you could give us as well so we can get back to some underlying numbers.
I can start with the first question you had regarding the broadband ARPU. It is rightly, as you said, roughly half of it is dilution of the Bredband2 customers coming in. The rest is driven by a combination of that we have higher share of customers in binding, meaning we can now minimize, of course, the price adjustments on those customers. We see also a growth in more collective agreements, which is normally lower in the ARPU. The third one is that also that you said, the market is more competitive now, especially in the open network side, as you say. Again, we are also in a phase where we do less pricing on broadband on average. We are more focused on the TV side at the moment. Those are the main reasons. It is not a single one, like competition. It is a combination of several.
Thank you. The next one was?
Yeah. Bredband2, just those numbers for you, Nick. Just to be clear, growth figures are like for like.
Sure
impact there. But the absolute numbers are as follows. SEK 466 million gross service revenue, SEK 381 million net, because the delta being wholesale revenues that we had. So you eliminate those. The EBITDA contribution in Q3 from BB2 was SEK 71 million.
That is great. Thanks very much, Eric. Cheers, Patrik.
No worries.
The next question comes from Abhilash Mohapatra at BNP Paribas. Please go ahead.
Hi. Morning there. Thanks for taking my questions. A couple of themes, please. Firstly, just coming back to the success of no-frills brands. You've called out the recognition for OneCall in Norway and Fello is also doing quite well in Sweden. Going forward, how do you think about the balance between addressing that segment and pursuing customer growth versus the risks of downspinning on overall consumer ARPUs? Secondly, just following up on Bredband2, could you give us a quick update on how you see the synergy benefits of that coming through? It's been about a year since that deal was closed. How should we think about that going into 2027? Thank you very much.
Thank you, and morning. I can take the first question. As you remember, we dismantled or stopped working with the brand, Halebop, during the summer, which we migrated very successfully over to the Telia brand. Now we have a much clearer market positions between the brands. One is the Fello in the more value-based segment, competing mainly with brands like Vimla and Hallon. Then, of course, we have the Telia brand. This is our premium brand. We see a clear market definition between those two, and we're growing actually in the both phases, which is very positive for us. Overall, we are very happy with the situation at the moment, and we don't feel that the competition is more intense now in Sweden than it has been. It's basically the same level as it always has been.
If we should say something about competition, what we feel in the market, it's much more intense in the B2B side, especially on the large accounts, the public tenders. There it's much more aggressive and price intense competition than maybe in the consumer side. Overall, the consumer market in Sweden works very well. Then the next question was?
Yeah, that is on the Bredband2, what the contribution is and how things are progressing on the synergy side. Service revenue synergies are developing well. We are cross-selling TV to this customer base and also mobile services. I would say pretty much in line with the business case, if you will. Cost synergies are also developing in line with plan, maybe slightly better even. Just to remind you of what we said at the time of the acquisition, it is neutral to our free cash flow in 2026 because yes, you have benefits, but you also have integration cost, so no impact in 2026. Then we said it has a contribution of roughly SEK 200 million positive next year.
Thank you. Maybe just to follow up on the no-frills point, any commentary on the Norwegian market where OneCall, as you called out, has been a very successful brand.
No, I think it is very similar. We feel the Norwegian market quite stable. It is very driven by campaigns, so no news. We have clear market positions for the brands that we have, and OneCall works very well in the value segment, and we have then the Telia again on the premium side. I think we have a model that works and suits us very well at the moment. So no change in that behavior.
That is very helpful. Thank you.
Thank you.
The final question comes from Keval Khiroya at Deutsche Bank. Please go ahead.
Thank you. I've just got two questions, please. Firstly, Norway, you've highlighted the decent improvement in KPIs. Can you elaborate a little bit more on what's driving that? Ultimately, are you being a little bit more promotional than before? Secondly, just on AI agents, how do you think about the revenue risk to your business or not? Can you give us a sense of front book versus back book pricing for your three main Nordic markets? Thank you.
The first one I can take, Keval. Norway KPIs, yes, we're seeing an improvement on the mobile side. We're happy with that. It's the best for quite some time. We haven't really been that much more promotional or not more promotional at all, we think, versus last year. I think we've received the questions a few times, I think in response to one of our competitors talking about it, but we don't quite recognize that picture. We are spending on similar levels as we did before.
When it comes to AI agents, I am not sure what your question is, if it is about the news from Muse that came from the U.S. or—
Yeah, that is correct.
—is that okay? Yeah.
Yeah.
Yeah, okay then. We have already been operating in a world where AI is a part of the customer interface for some time now. I think we have been focused on making our services easily discovered by AI tools. This is changing from SEO optimization basically to AI optimization instead. This is an environment to win new businesses. This is already active. We do not have a big gap between front book and back book pricing. Still, it is quite complicated to do a follow-up buy, because we need to identify the person or the individual that is buying with BankID or other solutions. So we are not that concerned. We see it more as a move in customer behavior, what kind of tools you use. Instead of Google it, you use AI assistant instead to find it.
We are working actively with this one already today to make sure that the information is correct and that, of course, it is beneficial for us and this will continue. We are not that concerned regarding the new method. Instead of Googling, you use the AI tools instead.
That is clear. Thank you both.
All right. Thank you, everybody. Very good questions. We have to end the call now. Looking forward to speak more to you in the coming days and weeks. Thank you and goodbye.