EU COMMUNICATIONS: Telia: Q225 Results
(TELIAS ; Baa1/BBB+/NR) Slight Positive
Top line was broadly in line but with a healthy EBITDA margin beat attributed to the simplification/efficiency programme implemented in Q4 with H1 op ex lower across all units. FY guidance was left in place ahead of a slightly slower Q3. Flagging some small M&A news below; the Bredband2 deal is only ~0.1x of reported leverage.
- Q2 revs SEK 19.8bn (+1.2% LFL, 1% miss). H1 +2.2% LFL.
- Q2 service revs SEK 16.8bn (+1% LFL, in line). H1 +1.4% LFL.
- Q2 adj-EBITDA margin 40.3% (+2pp YoY, +1.6pp vs. cons). H1 39.6% (+1.5pp YoY).
- Q2 CapEx SEK 3bn vs. SEK 3.5bn in Q224. H1 SEK 5.8bn vs. SEK 6.5bn in H124.
- Q2 FCF SEK 2.3bn vs. SEK 1.9bn in Q224. H1 SEK 4bn vs. SEK 1.6bn in H124.
- Reported leverage 2.1x vs. 2.3x at FY24, 2.2x at Q224.
- FY guidance affirmed; Q3 seen slightly soft before re-accelerating in Q4.
- Announced a cash-funded, SEK 3.1bn (35% premium) tender for Bredband2, a small, Sweden-only fiber ISP.
- Telia has also signed an MoU to divest it’s Latvian ops; no terms disclosed.
- Also flagging a BBG sources piece noting that CapMan may sell its 60% stake (~€500mn) in Finnish fiber JV Valokuitunen Telia (40%) is reportedly open to new partner.
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STIR: Fed Pricing Little Changed Over Data, Under 50bp Of Cuts Through Dec
Fed Funds little changed on net over the 08:30 NY data, with much softer-than-expected housing market data and a roughly inline round of jobless claims readings having no lasting impact.
- Geopolitical risk and related spot inflation pressure remains front of mind for markets, negating any impact from the soft housing readings.
- Note that continuing claims data still signals a softening labour market.
- 0bp of easing priced for today’s Fed decision, 3.5bp showing through July, 18bp through September, 29.5bp through October & 46bp through year-end.
- SOFR futures also see limited reaction.
- The FOMC will hold rates for a 4th consecutive meeting today and continue to convey a patient stance on future rate cut decisions amid elevated government policy-related uncertainty.
- The new quarterly projections will still signal the resumption of rate cuts later this year, but likely only one 25bp reduction instead of the two cuts envisaged at the March meeting.
- Click for our full preview.
US TSY FUTURES: BLOCK: Large Sep'25 5Y Sale
- -19,900 FVU5 108-06.5, sell through 108-07.25 post time bid at 0838:10ET, DV01 $867,000.
- The 5Y contract trades 108-04.5 last (+0.5).
US DATA: Upward Trend In Jobless Claims Confirmed
The weekly jobless claims data confirmed recent deterioration in the labor market. There was a sizeable step higher in initial claims compared to recent payrolls reference periods along with the highest four-week moving average since Aug 2023, whilst continuing claims hovered close to the previous week's fresh high since late 2021.
- Initial jobless claims were as expected at 245k (sa, cons 245k) in the week to Jun 14 – a payrolls reference period – after a slightly upward revised 250k (initial 248k).
- This can still be revised next week but for now it points to a clear step higher from reference payroll periods (226k for May, 216k for Apr, 225k for Mar and 224k for Feb).
- The four-week moving average increased to 246k from a marginally upward revised 241k (initial 240k) for its highest since Aug 2023.
- Continuing claims were a touch higher than expected at 1945k (sa, cons 1941k) in the week to Jun 7 after a slightly downward revised 1951k (initial 1956k).
- It rules out a larger downward revision from what had been a firm uptick in continuing claims in the prior week for a fresh high since late 2021, with only a marginal improvement seen in latest data.
- The claims rate saw a second week at 1.28% after two weeks at 1.25%. Increases from what had been sustained 1.2% readings has drawn some attention in recent weeks.
