Com Hem has announced a rise in revenue and addressable footprint in the fourth quarter, but EBITDA slipped partly because of fees in connection with the recently announced plans to merge with Tele2. Boxer lost unique customers, but Com Hem is confident of turning it around. Com Hem has decided not to scale up fibre deployments at new builds beyond its trial area, as its strategy of linking to third party infrastructure is showing success.
The group said revenue increased by 1.4 percent to SEK 1.81 billion in the fourth quarter, with Com Hem segment revenue increasing by 4.2 percent to SEK 1.39 billion. Operating profit (EBIT) slipped to SEK 203 million from SEK 228 million in the fourth quarter of 2016. EBITDA declined by 1.1 percent to SEK 693 million because of items associated with redundancy and advisory fees linked to the forthcoming merger with Tele2.
Underlying EBITDA increased by 3.8 percent to SEK 722 million for the group in the fourth quarter, with the Com Hem segment increasing by 5.3 percent to SEK 650 million. The net profit almost tripled to SEK 96 million and earnings per share rose to SEK 0.54 from EPS of SEK 0.18 a year earlier.
Cash flow from operating activities increased by 15.8 percent to SEK 654 million as a result of higher profits. Operating free cash flow increased by 3.1 percent to SEK 402 million for the group, with Com Hem segment increasing by 8.5 percent to SEK 384 million.
In the Com Hem segment, the total addressable footprint on 31 December was 2.63 million, up from 2.46 million on 30 September. This was the number of households connected to its fibrecoax and fibreLAN networks, third party open networks, and connected and/or passed by fibre in networks unbundled by the group.
The number of unique consumer Com Hem subscribers rose by 12,000 over the fourth quarter to 983,000. Broadband RGUs were up 14,000 to 750,000 RGU. Digital television RGU climbed by 4,000 to 655,000, with a continued growth of 5,000 TiVo customers, giving a TiVo penetration rate of 40 percent.
Consumer ARPU in the Com Hem segment was SEK 373, unchanged from the third quarter. Consumer churn worsened to 13.6 percent from 12.8 percent in Q3 2017, mainly caused by price adjustments in Q4, but small portion related to the Discovery blackout.
B2B ARPU rose to SEK 463 from SEK 425 in the third. Revenue at B2B declined to SEK 69 million in the fourth quarter from SEK 66 million in the third, and was down by 12.3 percent from SEK 79 million in Q4 2016, as Com Hem focuses on the OnNet broadband business, which it said grew by 17.4 percent compared with Q4 2016.
Com Hem said its Boxer Segment had an "expected temporary spike" in churn to 19.4 percent from 14.4 percent in Q3 2017, mainly due to the migration of the 700 MHz band and seasonal contract expiries, but partly caused by a lag effect of the Discovery blackout in September. Boxer’s ARPU grew to SEK 301 from SEK 298 in Q3 2017, thanks to increased dual penetration. Boxer added 5,000 broadband RGUs in the fourth quarter to 28,000.
There was a decline in unique consumers at Boxer of 12,000 over the fourth quarter to 451,000 on 31 December, compared with a 9,000 drop in the third quarter. There was a fall in Boxer RGUs of 8,000 to 480,000 at year-end compared with a decrease of 6,000 in the third quarter. Digital TV customers at Boxer fell to 443,000 from 456,000 in Q3 2017.
Boxer’s fibre footprint is now at 1.1 million addressable households, including roughly 200,000 that do not overlap with the Com Hem segment. The company expects Boxer's churn to remain elevated in the first quarter of 2018 as it adjusts prices for some customers, under what it calls the 'more for more' strategy. After a full year with Boxer, Com Hem is hopeful of turning it to RGU growth and stopping the revenue decline in the coming years, as the Boxer brand gains traction as a broadband-led TV operator on the expanding SDU footprint.
Com Hem said it continued its network expansion programme, with 100,000 addressable households added in the quarter to a total of 800,000 since the start of the expansion, 200,000 of which are unique to Boxer. Since the start of the footprint expansion eighteen months ago, the group has increased its footprint by 40 percent from 2.0 million to 2.8 million addressable households. It is confident that it can reach its target of at least 3.0 million households by 2020, an increase of 50 percent from before the single dwelling unit (SDU) expansion and the Boxer acquisition.
Deployment of its own fibre in trial areas continued during the fourth quarter and will conclude in early 2018. Given the success of its capex-light approach of connecting to third party infrastructure, Com Hem has no plans to scale up new build beyond the trial areas.
Com Hem reiterates its guidance for 2018 and beyond, aiming for mid-single-digit underlying EBITDA growth for the entire group annually. It expects growth to be skewed toward the Com Hem segment this year as it continues efforts to turn Boxer around. It expects capex for the entire group to be in the range of SEK 1.0-1.1 billion annually. It aims to maintain leverage at 3.5-4.0x underlying EBITDA LTM.
