Tele2 has abandoned plans to pay an extraordinary dividend from its 2019 results, saying it's better to conserve cash due to the uncertain economic outlook. The Swedish operator also withdrew its guidance for 2020 but said it was on track with its medium-term targets.
While it will not pay the extraordinary dividend of SEK 3.50 per share, the ordinary dividend of SEK 5.50 per share will be proposed still to the annual general meeting. Tele2 said its balance sheet remains strong, helped by the recent completion of the sale of its Croatian business, and its has a resilient business model which is cash generative even in volatile times.
Nevertheless, the global coronavirus pandemic creates uncertainty, and the company believes it's "prudent to maintain a financial buffer until there is more clarity on the length and impact of the outbreak". Once it has a better idea of the extent of the impact, it will call an extraordinary shareholders meeting to bring back the extra dividend, Tele2 said.
Underlying revenue, EBITDA down 1% in Q1
The announcement came alongside first-quarter results showing a 1 percent fall in both organic revenue and underlying EBITDA, to respectively SEK 6.69 billion and SEK 2.24 billion. Net profit improved slightly, to SEK 1.18 billion from SEK 1.02 billion a year ago, and operating cash flow increased to SEK 1.72 billion from SEK 1.62 billion.
Group organic end-user service revenue (EUSR) was flat in the quarter, with the Baltics growing by 10 percent while Sweden declined by 1 percent. Sweden also drove the drop in underlying EBITDA, with a 1 percent fall compared to 4 percent growth in the Baltics.
With EUSR expected to come under pressure this year from the economic slowdown, Tele2 said it will focus on EBITDA and accelerate some of its longer-term cost initiatives, while suspending certain other projects. Longer-term strategic plans, such as the commercial launch of Penny, the ramp up of Comviq broadband, the rollout of Comhem Play+, and the business transformation program to deliver at least SEK 1 billion of cost reductions over three years will continue.
Sweden revenues down 2%
In Sweden, the company reported a strong first quarter in the mobile consumer postpaid market, with 31,000 net customer additions. This was offset by the loss of 34,000 prepaid users and 23,000 fixed customers. The number of FMC customers grew to 232,000. Average spend per user was largely stable, helped by demand for unlimited data plans under its Tele2 family offer, and the company expects improvement from Q2 and especially in the second half of the year thanks to recent price increases.
Total revenues were down 2 percent year-on-year to SEK 5.43 billion in Sweden. Effects from the pandemic were mainly related to reduction of international roaming, lower equipment margins and higher bad debt provisions. Consumer EUSR in Sweden was roughly flat, as growth in mobile postpaid (4%) and fixed broadband (5%) was offset by declining digital TV (-6%), mobile prepaid (-1%) and fixed telephony and DSL (-17%). Swedish business EUSR declined by 6 percent, driven by an accelerated decline in fixed. The mobile service revenue decline was similar to previous quarters as the pressure on ASPU continues, Tele2 said.
