Telia to book $2 billion in write-downs as economy bites

Telia Company’s fourth quarter results will include the best part of US$2 billion worth of impairment charges as the economic situation impacts on its Nordic businesses, the telco group has warned.

Sweden-based Telia revealed that a total impairment of 19.8 billion kronor (US$1.94 billion) will negatively impact on its operating income for the fourth quarter and full-year 2022. The telco is due to publish its 2022 results on Thursday.

The bulk of the various impairments making up the total affect its businesses in Finland, Norway, Denmark and Latvia, and essentially stem from the broader economy, particularly rising interest rates.

“After conducting the review of the carrying value of Telia Company’s assets and reflecting the changed macro-economic landscape and increase in the company’s Weighted Average Cost of Capital (WACC) from increased market interest rates, there is a need to perform non-cash impairments of goodwill in a number of Telia Company’s business units,” the operator said, in a brief statement announcing the move.

It will book a non-cash impairment charge of SEK9.5 billion on its operation in Finland, SEK8.5 billion in Norway, and SEK1.1 billion relating to its Denmark and Latvia operations, it specified.

In addition, it will write down the value of the C More streaming platform brand by SEK0.3 billion, having made the decision to consolidate the business unit under its TV4 operation in Sweden and MTV in Finland over the coming years.

And it will take a non-cash impairment of SEK0.4 billion on its network assets its home market on the back of plans to fully dismantle its copper network there by 2026.

It goes without saying that this is not great news for Telia. The operator highlighted the impact of macro-economic challenges in a number of quarterly results announcements last year, and last quarter cut its full-year earnings guidance as a result of rising energy prices, noting that its energy cost increase for the year would be around SEK900 million ($88 million), or SEK600 million higher than it had predicted as recently as the previous quarter.

“Macroeconomic headwinds…strengthened from a breeze to a mild storm during the summer, with sharply higher energy prices and interest rates,” Telia CEO Allison Kirkby said in prepared remarks accompanying its Q3 numbers. The operator was able to mitigate some of those headwinds, but “near-term energy prices and interest rates are having implications for our outlook,” Kirkby said.

It now looks like those implications are more acute than the telco was able to predict back in October.

Telia’s announcement is not great news for the broader industry either. The Swedish is far from being the only one battling those macro-economic headwinds; energy prices and rising interest rates are affecting everyone. It’s fairly safe to predict we’ll see more of this type of announcement as the year pans out.

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