Telenor Posts 8.5 Billion Kroner in Free Cash Flow, Returns to Organic Growth
Key Facts
Telenor reported third-quarter results on October 28, posting total free cash flow of 8.5 billion Norwegian kroner and free cash flow before mergers and acquisitions of 4.7 billion kroner. The group said service revenue was 14.8 billion kroner, while adjusted operating profit before interest, taxes, depreciation and amortization reached 8.8 billion kroner. Organically, service revenue grew 1.6% and operating earnings 1.5% from the same period a year earlier. But reported revenue fell 2.9% to 18.593 billion kroner, and adjusted operating profit declined 3% from a year earlier. The results show a divergence between organic growth in the core business and declines in reported figures in local currency.
Net income attributable to Telenor shareholders was 9.8 billion kroner, and adjusted earnings per share rose 45% to 2.70 kroner. However, reported net income included a gain of 6.907 billion kroner from the sale of Telenor Connexion, while adjusted net income was 3.679 billion kroner. Reported revenue was 18.593 billion kroner, compared with 19.147 billion in the third quarter of the previous year, while adjusted operating profit fell from 9.050 billion to 8.776 billion kroner. By contrast, free cash flow before mergers and acquisitions rose 13% year on year to 4.7 billion kroner. The company said total cash flow reached 8.5 billion kroner during the quarter.
The organic operating improvement followed a difficult second quarter, when service revenue fell 0.7% and operating earnings declined 4.8% year on year on an organic basis. The company attributed the pressure that quarter to tough year-on-year comparisons, the timing of commercial initiatives, transformation costs and challenging economic conditions in Bangladesh. It also cited weak market conditions in Norway and limited improvement in Finland. The company said higher transformation costs and duplicated technology structures were expected to begin easing near year-end and continue to do so through 2027. The group's new organizational structure took effect in August as it works to control costs and support operating performance.
Norway was among the main sources of improvement compared with the previous quarter, with cost discipline contributing to the performance. In Sweden, operating earnings grew for the fifteenth consecutive quarter, and the company added 35,000 new mobile customers during the quarter. Telenor described sequential developments in Finland and Denmark as stable. In Bangladesh, Grameenphone maintained profitability and returned to service revenue growth while continuing to control costs. The results present a mixed picture across the group's markets, with improvement in Norway and Sweden coinciding with a return to growth in Bangladesh and stable performance in Finland and Denmark.
On liquidity, Telenor maintained its 2026 guidance for organic adjusted operating earnings growth ranging from flat to a slight decline, and free cash flow before mergers and acquisitions of about 10 billion kroner. The cash flow target excludes dividends from associates and additional spectrum payments. The company also expects capital expenditure to be about 14% of sales, excluding leases, within the Nordic telecom sector outlook for flat to low single-digit organic growth in service revenue and adjusted operating earnings. At the end of September, interest-bearing net debt was 42.5 billion kroner and leverage was 1.2 times. This puts the cash flow target in the context of the company's balance sheet and operating outlook for the year.
The chief executive linked the balance sheet position to an acceleration of the 15 billion kroner share buyback program. The company said it aims to complete the program within two years, instead of the original three-year period, citing its strong financial position and moderate leverage. This shortens the announced timeframe for completing the program, alongside reaffirmation of its 2026 cash flow guidance. The disclosed information did not include a detailed schedule for the purchases. The target keeps the program's size unchanged while accelerating the timeframe for its completion.
The group continues to expand its home broadband business in Norway and Sweden through the Bahnhof, GlobalConnect and Enivest deals. Telenor said the three deals are expected to add more than 650,000 consumer broadband customer relationships once completed. This comes alongside efforts to strengthen the company's presence in fixed-line telecom services in Nordic markets. In defense communications, group subsidiary KNL secured a framework agreement allowing the Danish armed forces to buy highly secure, high-frequency communications systems. Denmark became the third Nordic country in KNL's agreement within NORDEFCO, alongside Finland and Sweden.