Telia takes Coronavirus hit through exposure to free TV market

While the majority of telcos are weathering the Coronavirus storm well relative to other sectors, Nordic telco Telia’s recent acquisition of TV4-owner Bonnier Broadcasting and its consequent exposure to the advertising market and the cancellation of sports events has forced an admission that it will not make its financial guidance goals this year.

Telia said it would provide updated 2020 guidance as soon as possible and admitted that its targets for EBITDA and free cash-flow will not be achieved.

”The effects from the pandemic will have a material negative financial impact primarily on the TV & Media unit. Despite an increased TV consumption, which has resulted in an increase in the reach for our already popular TV channels, Telia Company has witnessed a rapid decline in the advertising revenues. In addition, the global cancellation of sporting events has had a negative impact on our pay TV revenues,” said acting president and CEO Christian Luiga,

“Given the present circumstances the full impact for 2020 is difficult to estimate but our current assumptions suggest an EBITDA for the TV & Media unit in the range SEK 0-0.5 billion (2019 SEK 1.5 billion). This implies that the ambition of an operational free cash flow of around SEK0.5 billion from TV & Media in 2020 will not be met but we cannot give a new level at this point.”

Luiga,who is due to make way for former TDC CEO Alison Kirkby in May, said that Telia’s other business units would only be affected “to a limited extent” under current assumptions.

However, he added, the telco business would suffer too if current government-imposed restrictions on movement remain in place too long, with travelling restrictions impacting roaming revenues and the crisis having a general detrimental impact on market dynamics, supply chains and the financial stability of customers.

Telia’s board has already decided to reduce the company’s proposed dividend from SEK2.45 a share – equivalent to SEK10 billion (€910 million) in total – to SEK1.80 per share dividend for 2019 – equivalent to about SEK7.4 billion.

According to analysts at Jefferies, about 65% of Telia’s TV revenues are tied to free-to-air advertising.

Jefferies’ analysts said that “Telia’s TV/Media business, as an advertising-driven FTA broadcaster with material market share also outside the telecom subscriber base, is a rather unusual asset in the business portfolio of a European telco” with other telco TV operations tending “to be pay TV-only and/or more limited in scope within the respective equity cases”.

Jefferies said it remained convinced of “the relative resilience of the telco sector” in general during the Coronavirus crisis.