Elisa is Finland's largest integrated telecom operator -- Consumer, Corporate and International Software Services (Elisa IndustriQ) segments -- with 83% of LTM revenue in recurring service revenue (EUR1,879m of EUR2,257m FY2025) and designation as critical national infrastructure. It owns rather than leases its network (PP&E EUR883m vs right-of-use assets at just 5.5% of fixed operating assets) and holds a technology-leadership position (first in Europe to 5G Advanced, first in the world to 5.5G for consumer). Adjusted ROIC of 14.0% clears the 8% WACC for +EUR164.6m of economic profit, and the spread is durable: reported EBIT held a narrow 431-488 five-year band (2021-2025) through a decade-worst 2H2025 Finnish mobile price war, with post-paid churn back at its 10-year Q2 average (16.7%) and comparable EBITDA at a record 35.8% margin.
The mttssn book-standard 8% WACC is retained for cross-book comparability, but the extraction record documents it as conservative for this name: an independent CAPM build (2.5% effective cost of debt, ~21% market gearing, defensive-telecom beta) lands at roughly 6.5-7.0%, at which EP would be EUR205.8m (+25%) rather than EUR164.6m. At the book-standard rate the EUR34.3 price embeds only about 2.4% perpetual NOPAT growth; at the record's own CAPM estimate that falls to under 1% -- undemanding against a 3.1% five-year revenue CAGR, ISS organic-growth guidance of 5-10%, and a mobile-pricing tailwind management flags as 'especially supporting Q4 telecom service revenue.'
The offsetting caution is capital allocation, not the operating franchise: the payout ratio has crossed 100% for two straight years (112.6% in 2025) against retained earnings that fell in a profitable year, funded partly by rising net debt (EUR1,219m to EUR1,508m, 2021-2025) against flat equity -- the same policy that produces the headline-grabbing 94.5% goodwill/equity ratio, which the full Note 5.5 impairment test (7.4x headroom coverage) refutes as a distress signal. The one genuine watch item is International Software Services: 18% of goodwill (EUR227.4m) against only EUR190m of headroom, after a 1H2026 EBIT loss management attributed to geopolitically delayed license agreements.
Capitalising adjusted NOPAT of EUR384.5m through the enterprise-value bridge (less EUR1,482.3m net debt, 160.56m shares) shows the EUR34.3 price requires only ~2.4% perpetual NOPAT growth at the conservative 8% book WACC -- comfortably inside the 3.1% five-year revenue CAGR -- and under 1% at the record's own ~6.5-7% CAPM estimate. That asymmetry, not a single reverse-DCF point estimate, is the margin of safety here.
Base EUR40 (+17%, book-standard 8% WACC with modest 3% growth as competitive normalisation and the mobile-pricing tailwind land into Q4 2026); bull EUR46 (+34%, market WACC re-rates toward the record's ~7% CAPM estimate as the ISS turnaround and fibre/data-centre wins land); bear EUR25 (-27%, renewed mobile-price competition, the ISS goodwill watch item crystallises, and the >100% payout forces a dividend reset).
The market pays today’s enterprise value for roughly 9.8% NOPAT growth over 5 years. The business earns 14% on capital against a 8% cost of capital (spread +6.0 pp); the no-growth value is €25/share (74% of price), so the rest is priced-in growth.
| Scenario | 24m target | Impl. g | Upside | Prob. | Driver |
|---|---|---|---|---|---|
| Bull | €46 | ≥13% | +34% | 30% | WACC re-rates toward record's ~7% CAPM estimate; ISS turnaround + fibre/data-centre wins land |
| Base | €40 | ≥13% | +17% | 45% | Book-standard 8% WACC, modest 3% growth as the price-war normalises into Q4 2026 pricing tailwind |
| Bear | €25 | -0% | -27% | 25% | Renewed mobile price war, ISS goodwill watch item crystallises, >100% payout forces a reset |
| Prob-weighted | €38 | — | +11% | 100% | Scenario-weighted expected value |
| WACC \ g | 0% | 3% | 5% | 8% | 10% | 15% |
|---|---|---|---|---|---|---|
| 6.50% | 38 | 42 | 45 | 50 | 54 | 64 |
| 7.25% | 30 | 34 | 36 | 40 | 43 | 50 |
| 8.00% (base) | 25 | 28 | 30 | 33 | 35 | 40 |
| 8.75% | 21 | 23 | 25 | 27 | 28 | 32 |
| 9.50% | 18 | 20 | 21 | 23 | 24 | 27 |
Green = fair value above the current price of €34.30. The reverse-DCF conclusion is dominated by WACC and growth — see the whole surface, not a single fair value.
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ROIC 14.0% vs 8% WACC (+EUR164.6m EP), stable through a 431-488 five-year reported-EBIT band despite the 2025 price war.
Owns its fibre/mobile network in a market too small to duplicate; churn back at the 10-year Q2 average (16.7%) and record 35.8% comparable EBITDA margin held through the price war.
The record's own CAPM build (~6.5-7%) sits below the 8% book standard -- EP would be +25% higher, and implied growth falls to under 1%.
83% of LTM revenue is recurring service revenue; critical-infrastructure status plus 98.7% FCF/NOPAT conversion.
International Software Services guided to 5-10% organic growth; new data-centre connectivity and Lumo Plc (44,000 apartments) wins.
Elisa combines a durable, efficient-scale-moated economic-profit spread (+EUR164.6m at 8% WACC, +25% more at the record's own CAPM estimate) with a price that embeds undemanding growth (under 1% to 2.4% depending on WACC) and a ~7% dividend yield. We rate it BUY, medium conviction; base target EUR40 (+17%).
Conviction rises on evidence the payout stabilises below 100% without a leverage step-up, and on ISS returning to profit; we would revisit on a second consecutive ISS-driven goodwill trigger or a structural (not cyclical) re-acceleration of the Finnish mobile price war.
Every adjustment traces to the cited note/page in the source filing — click to open it there. Annual report / 10-K: 📄 open · Latest interim: 📄 open
| Adjustment / figure | Value | Source | Why mttssn treats it this way |
|---|---|---|---|
| LTM revenue (roll-forward) | 2,248 | Q2 2026 Consolidated income statement, p.12 (FY2025 column 2,257.1; 1H2025 1,108.2; 1H2026 1,099.2) 📄 p.12 | LTM revenue = FY2025 2,257.1 - 1H2025 1,108.2 + 1H2026 1,099.2 = 2,248.1. The interim's own prior-year comparative column is used so both halves sit inside Elisa's post-1 Jan 2025 three-segment structure. Note this differs from the Borsdata stub's 2,266.7 — the primary filing governs. |
| LTM EBIT (roll-forward) | 464 | Q2 2026 Consolidated income statement, p.12 (FY2025 465.9; 1H2025 243.8; 1H2026 242.2) 📄 p.12 | LTM EBIT = 465.9 - 243.8 + 242.2 = 464.3. This is the NOPAT base before mttssn adjustments; the same roll gives LTM EBITDA 768.8 and LTM D&A 304.4. |
| Items affecting comparability — full FY2025 bridge | -45.8 | AR2025 Note 2.2 Items affecting comparability, p.111 📄 p.111 | The single most important note for this name. FY2025 IAC in EBIT = restructuring -31.8 plus network dismantling and repair -12.0 plus impairment losses of fixed assets -2.0 = -45.8 (2024: -16.6, restructuring only). Reconciles reported EBIT 465.9 to Elisa's Comparable EBIT of 511.7. mttssn accepts only the 12.0 and the 2.0 as genuine one-offs. |
| Network dismantling one-off — ADDED BACK pre-tax | 12 | AR2025 Note 2.2, p.111 ('Network dismantling and repair costs -12.0'; 2024 comparative nil) 📄 p.111 | Genuinely non-repeating: the physical decommissioning of Elisa's copper/PSTN estate, a once-in-a-company-lifetime event. Confirmed by the Q2 2026 CEO review p.3 ('we completed the ramp-down of the fixed-line network that served Finns for over 140 years') and Q2 2026 p.4 ('Traditional fixed network services were discontinued at the end of the quarter'). Appears in neither the 1H2025 nor 1H2026 interim IAC footnotes, so the whole charge falls in H2 2025 and survives the LTM roll. |
| PP&E impairment — ESCALATION REASON (a), CONFIRMED | 2 | AR2025 Note 5.1 Depreciation, amortisation and impairment, p.132 ('EUR 2.0 (0.1) million of impairment losses have been recorded for the assets'), cross-referenced to Note 2.2 p.111 ('Impairment losses of fixed assets -2.0') and the Note 5.2 PP&E roll-forward, p.132 📄 p.132 | ASSET CLASS: tangible (PP&E), fixed by the sentence's position under the Tangible-assets block of Note 5.1 and by its inclusion in the 190.3 'Depreciation and impairment' line of the PP&E roll-forward. ASSET: legacy fixed-line network — the same Note 5.2 roll shows Telecom devices gross cost falling 4,034.8 to 2,637.5 on 1,609.7 of disposals as the copper estate was retired; the 2.0 is the unrecoverable residual. MATERIALITY: 0.43% of LTM EBIT, 0.09% of LTM revenue, 0.07% of IC. NO goodwill or intangible impairment was taken in 2025 (Note 5.5 p.137). Added back at its after-tax value 1.6 using Elisa's own 20.09% tax effect on IAC (9.2 / 45.8, Note 2.2 p.111). The escalation is correct by rule but immaterial in substance. |
| Restructuring — NOT added back (normalised as recurring) | 31.8 | AR2025 Note 2.2, p.111 (2025 -31.8, 2024 -16.6); restructuring provision balance 21.2, Note 8.2 p.154 📄 p.111 | Fails the industrial checklist's recurrence test decisively — a reported-vs-comparable EBIT gap exists in all five disclosed years and continues into 1H2026. The Q4 2025 transformation programme cut 357 jobs and targets EUR 40m of 2026 savings (AR2025 p.8), which the Q2 2026 CEO review p.3 confirms is on plan. Permanent transformation is an operating cost of a mature incumbent, not an exceptional item. This single decision accounts for essentially the whole -7.1% APM divergence. |
| 5-year APM history (recurrence evidence) | 512 | AR2025 Note 9.2 Alternative performance measures, p.161, read against Note 9.1 Key indicators, p.160 📄 p.161 | Comparable EBIT 512/504/487/472/439 vs reported EBIT 466/488/482/470/431 for 2025/2024/2023/2022/2021 — an items-affecting-comparability gap of 45.8/16.6/5/2/8 in EVERY one of the five disclosed years. This is the hard evidentiary basis for normalising restructuring rather than adding it back. Note 9.1 also supplies the 5-year revenue and EBIT series used to reject the cyclical-encoding rule. |
| Goodwill by CGU plus impairment-test assumptions — ESCALATION REASON (b) | 1,262 | AR2025 Note 5.5 Goodwill, pp.136-137 (allocation, value-in-use model, discount rates, headroom, sensitivity) 📄 p.137 | CGU allocation Consumer 643.7 / Corporate 391.1 / International Software Services 227.4. Five-year management projections, 2.0% terminal growth for all three, pre-tax discount rates 6.6% (both telecom CGUs, up from 5.9% in 2024) and 11.7% (ISS). Headroom over CGU carrying value: 6,560 / 2,567 / 190 = EUR 9,317m total, 7.4x the entire goodwill balance. Break-even moves (the table is headed 'Change in projection parameters'): Consumer -20.7pp EBITDA margin or +19.6pp discount rate; Corporate -14.5pp or +15.6pp; ISS -7.0pp or +6.0pp. No impairment recognised, accumulated goodwill impairment zero. Conclusion: the 94.5% goodwill/equity ratio is a thin-DENOMINATOR artefact, not an impairment signal — the only genuine watch item is ISS (18% of goodwill, EUR 190m headroom) after its 1H2026 loss. |
| Payout history — the cause of the thin book equity | 1.126 | AR2025 Note 9.3 Per-share indicators, p.162 (payout ratio 112.6% / 105.3% / 96.2% / 92.1% / 95.6% for 2025-2021; treasury shares Note 7.3.1 p.144) 📄 p.162 | Quantifies why goodwill/equity is about 95%: Elisa has distributed essentially 100% of earnings for five straight years and MORE than 100% for the last two, paying EUR 381.4m of cash dividends in 2025 against EUR 342.0m of parent profit, so retained earnings FELL from 856.1 to 821.4 in a profitable year (AR2025 pp.106-107). Treasury shares of -116.5 (4.08% of shares) deduct a further 8.7% of the equity base. Debt-funded capex and the 2024 M&A wave built the goodwill while the payout policy prevented the equity from growing to match. |
| Balance sheet snapshot for IC | 1,342 | Q2 2026 Consolidated statement of financial position, 30.6.2026, p.13 📄 p.13 | Total equity incl. NCI 1,342.0 (parent 1,335.6 plus NCI 6.4); interest-bearing financial liabilities 1,395.8 + 65.1 = 1,460.9; interest-bearing lease liabilities 104.2 + 31.9 = 136.1; pension obligations 5.9; cash 114.7. Ties to Elisa's own net debt of 1,482.3 (Q2 2026 Note 13, p.26). IC uses the interim snapshot, not the FY anchor. |
| Right-of-use assets and lease composition (IFRS 16 / masts and sites) | 141 | Q2 2026 Note 3, p.21 (ROU inside PP&E book value 1,024.4 = owned 883.3 + ROU 141.1); AR2025 Note 5.3 Right-of-use assets, p.134 📄 p.21 | ROU is 5.5% of fixed operating assets — Elisa OWNS its network (PP&E 883.3, of which telecom devices 676.7) and has not done a tower sale-and-leaseback, so lease_liabilities_in_ic = false. Two telecom-specific confirmations from Note 5.3: last-mile rentals from other operators and IRU contracts do NOT meet the lease definition (so wholesale access is genuine opex, not disguised finance), and mast/site ground leases show up as only 20.2 of land-and-water ROU. Sensitivity disclosed: capitalising the 136.1 of lease liabilities would cut ROIC from 14.0% to 13.3%. |
| Lease interest already below EBIT (no NOPAT add-back) | 4.3 | AR2025 Note 7.4.1 Financial income and expenses, p.145 ('Interest expenses on lease liabilities -4.3') 📄 p.145 | Confirms the IFRS 16 treatment directly: lease finance cost is inside financial expenses, never in EBIT. So no implied-interest add-back is warranted regardless of the IC decision — the New Constructs add-back applies only to US-GAAP pre-ASC-842 operating leases. |
| Off-balance-sheet residual leases | 20.4 | Q2 2026 Note 9 Off-balance sheet lease commitments, p.25 (20.4 at 30.6.2026); AR2025 Note 8.4, p.158 (16.7 commitments; 49.5 annual expense = 37.0 short-term + 12.5 low-value) 📄 p.25 | The EUR 49.5m annual rental expense looks material against EBIT (10.7%) but the contractually locked non-cancellable residual is only about EUR 20m — these are genuine short-term (under 12 month) and low-value rentals, correctly expensed. operating_lease_eva_split = 0; any implied interest would be well under EUR 1m. |
| R&D capitalisation rate and its direction | 13 | AR2025 Note 2.5 Operating expenses / Research and development costs, p.115 (25.1 expensed + 13.0 capitalised = 38.2); amortisation of development costs 17.5, Note 5.4 p.135 📄 p.115 | Cap rate 13.0/38.2 = 34.0%, nominally above the industrial checklist's 25% escalation threshold — but amortisation of the existing stock (17.5) EXCEEDS current capitalisation (13.0) by 4.5, so the policy DEPRESSES reported EBIT by about 1% rather than flattering it. No reversal booked: mttssn does not take an adjustment that improves earnings on a technicality. Carrying value only 31.3 (1.1% of IC), amortised over 3 years. Corrects the streamlined pass's 12.5/38.0. |
| PPA amortisation from the Elisa IndustriQ M&A roll-up | 4.4 | AR2025 Note 5.4 Intangible assets, p.135 (customer-base amortisation 4.4, carrying 8.6); acquisitions Note 3, pp.117-122 📄 p.135 | Purchase-price-allocated customer-base intangibles from camLine, sedApta, Moontalk, Leanware, Romaric and iCADA, amortised over 3-5 years. Elisa's own Comparable EBIT does NOT add this back (Note 2.2 definition, p.111), so there is nothing for mttssn to reject — and at 0.9% of EBIT it would be immaterial anyway. The 2025 PPA additions were tiny (iCADA: 0.8 to customer base, 0.5 to software, 3.5 of goodwill on a EUR 5.5m price); the goodwill was overwhelmingly built in 2024 (EUR 106.1m added). |
| Spectrum / licence intangibles (telecom overlay) | 175 | AR2025 Note 5.4 Intangible assets, p.135 ('Other intangible assets' book value 175.3, footnote: includes software of EUR 119.9m); amortisation periods Note 5.4 accounting principles, p.136; 450 MHz licence AR2025 p.32 📄 p.135 | Elisa does NOT disclose spectrum separately — frequency licences sit inside 'Other intangible assets', bounding them at no more than 55.4 (175.3 less 119.9 of software) or under 2.0% of invested capital. Marked as a disclosure gap rather than estimated. They are capitalised and amortised straight-line over 3-10 years, so they are already correctly inside both NOPAT (via the 55.8 of other-intangible amortisation) and IC (via intangibles in equity); no adjustment needed. Finnish spectrum is an order of magnitude cheaper than the German/Italian auctions that make spectrum a first-order IC item for other European operators. Only one licence is named in the report: the 450 MHz mainland-Finland band, valid to 31 Dec 2033. |
| Network capex vs depreciation (telecom overlay) | 292 | AR2025 Note 5.2 PP&E additions 207.6, p.132 plus Note 5.4 intangible additions 84.8, p.135, against Note 5.1 total D&A 298.4 less Note 5.3 ROU depreciation 30.4, pp.132/134 📄 p.132 | The key telecom under-depreciation test. Owned-asset capital expenditure of 292.4 against ex-lease D&A of 268.0 = 1.09x — capex is running ABOVE depreciation, so reported D&A is not understating economic depreciation and no normalisation of the NOPAT charge is needed. Cash capex is 12.4% of revenue (279.0/2,257.1) against about 12% guidance (Q2 2026 p.4), and investment commitments stood at EUR 82.8m at 30.6.2026 (Q2 2026 Note 3, p.21). |
| Pension (IAS 19) — net liability and net interest reclass | 6 | AR2025 Note 4.3 Pension obligations, pp.129-131 (net liability 6.0; DBO 34.1 vs plan assets 28.2; net interest 0.2; discount rate 3.5%; duration 12.0 years) 📄 p.129 | Immaterial by design — Finnish TyEL is a defined-CONTRIBUTION scheme (49.7 of DC expense in 2025) and only Elisa Corporation carries small supplementary DB plans, 100% funded by acceptable insurances. Net liability 5.9 at 30.6.2026 = 0.4% of equity, well inside the checklist's 0-15% band. Net interest of 0.2, booked in employee expenses per the Note 4.3 accounting principle, is reclassed to financial items (+0.2 to adjusted EBIT). Sensitivity: a +0.5% discount-rate move shifts the obligation by only 0.4. |
| Share-based compensation — kept in opex | 4.6 | AR2025 Note 4.1 Employee expenses, p.124 ('Share-based payments 4.6', 2024: 9.7); equity-settled credit 2.3, statement of changes in equity p.107 📄 p.124 | 1.0% of EBIT and NOT added back by Elisa's own APM, so there is nothing to reject. The 4.6 vs 2.3 difference is the cash-settled withholding-tax portion, which is recognised directly in equity per the Note 4.2 accounting principle (p.129). Genuine compensation — stays in operating expenses. |
| Accumulated OCI (fair value reserve) | -10.8 | AR2025 Note 7.3.3 Other reserves, p.145 (fair value reserve -10.8 at 31.12.2025); +0.5 cash-flow-hedge movement in 1H2026, Q2 2026 statement of changes in equity p.15 📄 p.145 | Rolled to about -10.3 at 30.6.2026 and stripped out of equity, raising IC by 10.3 (ROIC -5bp). LIMITATION flagged not guessed: Elisa carries no separate translation reserve — cumulative translation differences go straight to retained earnings (AR2025 p.107) — so the cumulative FX component is unobservable. Annual flows are tiny (-2.8 / -1.5 / +0.9) and Finland is 82.6% of revenue, so the residual is small. |
| Tax reconciliation and Pillar II | 0.195 | AR2025 Note 8.1.1 Income taxes, p.152 (effective rate 19.5% vs 20% Finnish statutory; Pillar II commentary); Note 8.1.2 deferred taxes, p.153 📄 p.152 | No tax distortion to normalise. The reconciliation is short and benign: -1.0 non-deductible expenses, +3.1 foreign-subsidiary effects, -0.8 unrecognised losses. OECD Pillar II is explicitly assessed as immaterial ('Elisa mainly operates in countries with local tax rates above the 15 per cent minimum rate, no significant top-up taxes are expected'); the only Pillar-II consequence is a deferred Estonian profit-distribution tax of 8.9 (liability 17.4), which is a distribution timing item, not an operating tax. The LTM effective rate of 19.63% (83.6/425.8) is used throughout. Unused unrecognised tax losses EUR 26.3m. |
| Provisions and contingencies | 40.2 | AR2025 Note 8.2 Provisions, p.154 (restructuring 21.2 plus other 19.0); Note 8.4 collateral and commitments, p.159; Q2 2026 Note 10, p.25 📄 p.154 | Corroborates both one-off decisions. 'Other provisions' rose 17.4 in 2025 for 'environmental provisions made for telephone poles and air cable network' plus lease-restoration provisions (realising 2026-2028 and 2026-2061) — the balance-sheet counterpart of the EUR 12.0m dismantling charge, which is why the remaining physical work will consume the provision rather than re-hit P&L. The restructuring provision of 21.2 (realising 2026-2027) is the counterpart of the recurring charge mttssn declines to add back. Contingent liabilities are small (8.8 at FY2025, 40.1 at 30.6.2026 on a EUR 28.2m rise in guarantees on behalf of others) plus a EUR 64.1m VAT refund liability on real-estate investments that would crystallise only on a change of property use — none provisioned, none adjusted. |
| Cash flow detail | 653 | Q2 2026 Condensed consolidated cash flow statement, p.14; AR2025 Consolidated cash flow statement, p.106 📄 p.14 | LTM operating cash flow = 688.6 - 335.9 + 300.5 = 653.2; LTM cash capex = 279.0 - 140.2 + 135.0 = 273.8; FCF = 379.4, or 98.7% of adjusted NOPAT — high cash conversion with no accrual-quality flag. LTM dividends paid = 381.4 - 194.2 + 97.2 = 284.4 (the 2026 four-instalment schedule shifts the intra-year timing). Working-capital release of 5.9 in 1H2026 vs 33.9 in 1H2025 is the reason Elisa's own comparable cash flow fell 15% despite higher EBITDA (Q2 2026 p.6). |
| Segment detail (service vs equipment revenue; ISS) | 155 | Q2 2026 Note 1 Segment information, pp.16-18; AR2025 Note 2.1, p.110; revenue split Note 2.3, p.112 📄 p.17 | FY2025 revenue splits Consumer 1,352.2 / Corporate 749.6 / International Software Services 155.4, with EBIT of 333.2 / 146.0 / -13.3. Service revenue 1,879.0 vs equipment 377.4 (FY2025) — 83% of revenue is recurring service, the structural basis for treating this as defensive rather than cyclical. In 1H2026 ISS revenue grew 3.2% to 80.3 but EBIT stayed negative at -7.0; that unit is both the growth engine and the CGU with the thinnest goodwill headroom. |
| Financial liabilities, cost and maturity | 1,461 | AR2025 Note 7.4.2 Financial liabilities, p.146 (effective average interest rate 2.5%, average maturity 3.2 years); available financing Note 7.2.2, p.144 📄 p.146 | Supports the WACC discussion and the thin-equity-not-distress reading: bonds 1,278.1 plus bank loans 208.9 plus commercial paper 90.0 at a 2.5% effective average rate, against EUR 2,066.1m of total committed and non-committed facilities plus share-issue authorisation. Net debt / comparable EBITDA 1.8x (Q2 2026 p.5). A cheap, long, well-laddered capital structure — the leverage is a deliberate financing choice, not stress. |