Norwegian mobile operator Ice Group has announced a 11 percent year-on-year rise in third quarter operating revenues and the addition of 14,000 subscribers during the quarter. Alongside the results, the company announced it's considering funding alternatives, including a potential NOK 2.50 billion equity raising and a swap of existing debt for equity. It added that its 5G network in Oslo has become commercially available after the pilot phase.
Operating revenues rose to a record NOK 593 million from NOK 535 million a year earlier. Total service revenues grew to NOK 543 million from NOK 494 million a year earlier. Operating margins are increasing in line with previous guidance. For the third quarter, adjusted EBITDA was NOK 90 million, up from NOK 5 million in Q3 2020, implying a 15 percent margin, in line with guidance.
Ice added 14,000 new subscribers in the third quarter, bringing the total smartphone subscriber base to 677,000. The company is maintaining its “market leading” win rate in the B2C segment but total market portability was significantly lower than last year, denting the growth rate.
Smartphone churn fell to 23 percent in the third quarter from 26 percent a year earlier. EPSI's annual survey (Mobile Study 2021) of customer satisfaction among Norwegian mobile customers found that Ice Group has increased customer satisfaction the most in the industry, with an increase of a total of 4.6 points since last year.
ARPU improved slightly to NOK 235 in the third quarter from NOK 233 in Q3 2020. This summer, Ice launched a Family package which includes IceTrygg insurance for ID theft, online abuse and safe e-commerce. In the third quarter this product was also made available to non-family subscribers for NOK 69 per month.
On 18 November, the company has switched on its commercial 5G offering, starting in Oslo with fourteen sites using 2.1 GHz and 700 MHz frequencies. In the short term, Ice plans to run 5G in Norway’s four or five largest cities. In the longer term, its plan is to reach 75 percent population coverage with 5G. In September, Ice was awarded 80 MHz of frequency blocks in the 3,600 MHz band auction, which will be valuable for 5G expansion.
In the third quarter, Ice Group added 62 new base stations, bringing the total to 3,133. This is in line with its guidance of adding between 300 and 500 base stations in 2021. In the year to date, the company has added 246 new smartphone base stations.
The on-net rate for voice traffic was 71 percent in the third quarter, up from 57 percent in the same quarter last year, and data on-net increased to 89 percent from 83 percent a year earlier.
Ice expects the recent launch of its NiceMobil digital sub-brand to support growth. NiceMobil uses eSIMs and payments via credit card.
New business targets
Ice added that it has been reviewing its business plan options and financing for some time now. It has announced a new business plan involving two distinct market concepts and an accelerated 5G roll-out. The new business plan includes new medium-to-long-term targets for revenues of NOK 4 billion to NOK 5 billion, an adjusted EBITDA margin above 30 percent and a smartphone market share in Norway of above 20 percent. This all depends on successful funding under a new plan.
GoldenTree deal
The operator said it has reached an agreement with GoldenTree Asset Management in the dispute over Ice subsidiary AINMT Holdings’ loan deal with GoldenTree and other lenders. The parties have agreed that AINMT will pay a settlement of approximately NOK 1.50 billion by the end of 2021 to release each other from all claims and counterclaims. This requires the company to raise funds.
For the new business plan and Goldentree settlement agreement, Ice is considering funding alternatives. One is a potential equity raising effort with gross proceeds in the amount of up to NOK 2.50 billion, of which approximately NOK 1.50 billion would be for the GoldenTree loan and the other NOK 1.00 billion for “identified investment opportunities”. These include investments in 5G deployment, network capacity, deferred payments and other capital expenditure to support growth.
Debt swap under consideration
In parallel, Ice is in talks over the potential conversion into equity of its debt to Rasmussengruppen in the principal amount currently outstanding of SEK 546 million (Swedish kronor) and the convertible bonds of NOK 760 million (Norwegian kroner). Ice’s three majority shareholders support the process and are in talks with the intent to support Ice by converting debt to equity, but its largest shareholder has indicated that it does not expect to participate in the potential equity raising. It has, however, expressed interest in participating in converting its share of the convertible bonds.
If successful, the potential transactions could fundamentally improve Ice’s capital structure, cut net interest bearing debt by approximately 50 percent, and overall interest costs by almost NOK 300 million per year. The remaining funding requirement over the medium to long term is expected to be funded by increased secured and unsecured debt of about NOK 1 billion in Ice Group Scandinavia Holdings, with a medium to long term leverage target of 3-4 times NIBD/EBITDA/
Ice has retained DNB Markets as financial advisors. Advokatfirmaet Bahr has been engaged as legal advisor to Ice and Advokatfirmaet Thommessen as legal advisor to the managers.
