Com Hem Group saw a rise in revenue in the first quarter year on year but EBITDA and net profit fell because of items affecting comparability. It lost around 2,000 unique customers through the timing of a landlord contract that was not renewed. Consumer churn was high, but the group expects this to start coming down in the second quarter.
Group revenue in the first quarter to 31 March increased by 1.6 percent to SEK 1.78 billion, with revenue for the Com Hem brand increasing by 4.0 percent to SEK 1.37 billion. Operating profit (EBIT) was SEK 222 million compared with SEK 232 million last year, with a higher level of items affecting comparability.
EBITDA declined by 0.7 percent to SEK 702 million because of SEK 29 million more items affecting comparability related to the merger with Tele2 Sweden and to the reorganisation of its product, marketing and commercial departments to fit with a converged market. Underlying group EBITDA increased by 3.6 percent to SEK 738 million, with Com Hem segment EBITDA rising by 5.2 percent to SEK 661 million.
Cash flow from operating activities decreased by 4.2 percent to SEK 533 million, mainly caused by the timing of interest payments on senior notes. Operating free cash flow decreased by 1.1 percent to SEK 438 million group because of higher capital expenditure, with the Com Hem segment increasing by 3.8 percent to SEK 418 million.
Net profit declined by SEK 10 million to SEK 110 million because of higher items affecting comparability. Earnings per share fell to SEK 0.62 from EPS of SEK 0.65 a year earlier.
In the Com Hem segment, unique consumer subscribers rose by 4,000 in the first quarter to a record high 987,000. The number of broadband revenue generated units (RGUs) increased by 7,000 to record high 757,000. Digital television RGUs declined by 1,000 to 653,000 because of price adjustments, but TiVo customers increased by 3,000, giving a penetration rate of 41 percent.
Consumer blended ARPU fell to SEK 371 from SEK 373 in the fourth quarter of 2017 because of seasonal effects and the decline in fixed telephony. Consumer churn worsened to 14.8 percent from 13.6 percent in Q4, as price adjustments had been larger than in previous years, in line with expectations.
Turning to the Boxer segment, the company said churn remained elevated at 19.3 percent compared with 19.4 percent in Q4 because of price increases. Consumer ARPU was at a record high of SEK 304, up from SEK 301 in Q4. Boxer added 4,000 broadband RGUs in Q1 but it shed 9,000 unique consumers, compared with a loss of 12,000 in Q4. The decline in RGUs was 7,000 compared with 8,000 in Q4.
Com Hem expects churn to approach normalised levels in Q2 with the exception of a potential one-off effect related to a Boxer-specific content negotiation that is going on. Boxer’s fibre footprint increased from 1.10 million to 1.20 million addressable households in Q1, including approximately 200,000 that do not overlap with the Com Hem segment. Com Hem said a change in its customer cancellation procedures that it said helps it generate more revenue, will cause a small effect on churn linked to price adjustments in Q2 as well.
Operational KPIs for the quarter were affected by the timing of a landlord contract that Com Hem did not renew. As this affected about 2,000 unique customers, digital TV net additions would have been roughly flat and broadband net addition would have been closer to the regular quarterly run rate without this.
In the B2B segment, revenue fell by 10.6 percent or SEK 8 million year on year to SEK 66 million as it focused on the OnNet broadband business, where revenue grew to SEK 35 million from SEK 28 million a year earlier. Unique OnNet customers rose to 24 from 22 in Q1 2017 but were unchanged from Q4.
The Com Hem group is now connected to 2.9 million addressable households, 200,000 of which are unique to Boxer. In less than two years ago, the group has increased its footprint by 45 percent and it remains confident of reaching its target of at least 3.0 million households, which would be a 50 percent increase from before the SDU expansion and the Boxer acquisition.
In February, Boxer reached RGU neutrality for the first time since the acquisition. This is largely because of increased demand for Boxer TV during the Winter Olympics and is not yet a sustainable trend, but shows that the alignment of Boxer with the group’s more-for-more strategy is working, said Com Hem. It sees further potential for Boxer once the IT integration is completed next quarter and the TV Hub is introduced to Boxer customers.
Com Hem mentioned the April launch of its Android Tv Hub, and the arrival of its standalone, boxless SVoD service called ComBo. ComBo was developed in house alongside the Tv Hub. It said an OTT was the natural next step for Com Hem in its capacity as an aggregator of video content. It said ComBo opens up a new market segment in the shape of consumers who live within its footprint but are not necessarily traditional TV consumers.
It does not expect ComBo to materially affect near-term growth, but it will allow Com Hem to tweak the functionality, content and sales channels to eventually develop ComBo as a standalone, off-network TV service, catering to a much larger potential audience. It will also make the forthcoming merger with Tele2 even more attractive, it said, by combining a mobile network and a large mobile customer base with an on-the-go video service.
