Tele2 has reported a 2 percent decline in second quarter group revenue to SEK 6.79 billion, with end-user service revenue falling by 1 percent to SEK 5.08 billion. Net profit was SEK 2.1 billion, boosted by the capital gain from the sale in Kazakhstan but dented by goodwill impairment in Estonia. In Sweden, the Com Hem integration is progressing, and it reached its FY run-rate synergy target after only six months.
Second quarter group mobile end-user service revenue rose by 1 percent to SEK 2.77 billion but fixed service revenue fell by 5 percent to SEK 1.86 billion. Swedish revenue fell by 2 percent to SEK 5.46 billion, with consumer revenue there dropping 2 percent to SEK 3.86 billion and business revenue down 3 percent at SEK 1.60 billion.
Underlying group EBITDA grew by 3 percent on an organic basis excluding IFRS 16 to SEK 2.23 billion for the group and to SEK 1.78 billion in Sweden, driven by synergies from the Com Hem merger. Net profit from total operations was SEK 2.1 billion, boosted by a SEK 1.6 billion capital gain from the sale in Kazakhstan but hit by a goodwill impairment of SEK 452 million in Estonia. This impairment followed the reassessment of estimated future cash generation, reflecting a lower starting point after last year's decline in profitability. The value attached to the Estonian operation is now SEK 850 million on a debt-free basis.
Second quarter profit after financial items (EBT) was SEK 300 million, down from SEK 700 million.
Earnings per share after dilution was SEK 2.98, up from SEK 0.81 a year earlier. The company reiterated that it is proposing an extraordinary dividend of SEK 6.00 per share to distribute proceeds from the asset sales in Kazakhstan and the Netherlands. Equity free cash flow more than doubled to SEK 1.1 billion, driven by the Com Hem merger.
Tele2 said its financial guidance is unchanged but capex is updated to reflect that Croatia is now reported as a discontinued operation.
CEO Anders Nilsson said the Com Hem integration in Sweden is well under way and it realised another SEK 100 million in synergies, reaching its full-year run-rate target of SEK 450 million after only six months. Nilsson said it has begun a campaign to overhaul the Tele2 brand in Sweden and sees more progress in its fixed mobile convergence (FMC) strategy.
The Boxer brand was included in the FMC benefit scheme in Sweden for the first time in Q2. Of the addressable FMC base of approximately 300,000 customers who have both mobile and fixed services, there are now 93,000 customers on FMC. This paves the way for future revenue growth as it reduces churn and increases "pricing power", said Nilsson. Tele2 put its addressable fixed footprint in Sweden at 3.25 million on 30 June.
The Swedish consumer mobile postpaid stock saw net additions of 31,000 RGUs, driven by both Tele2 and Comviq, thanks to the rebranding campaign and lower churn. Swedish mobile consumer ASPU rose to SEK 168 in Q2 from SEK 166 in Q1.
Tele2 added 13,000 net RGUs in the fixed broadband segment but revenue growth slowed to 5 percent, mainly due to smaller price increases than last year, and temporary campaigns focusing on introductory discounts. Swedish consumer fixed broadband ASPU was SEK 247 in the second quarter, unchanged from Q1.
The Com Hem TV RGU base grew by 2,000 thanks to lower churn following smaller price increases. The DTT RGU base contracted by 9,000, mainly because of customers churning in areas that became connected to fibre. Swedish consumer digital TV ASPU was SEK 258 in the second quarter, up from SEK 257 in Q1. Year on year, television end-user service revenue decreased by 6 percent, mainly because of a decline in the Boxer RGU stock, somewhat offset by successful price adjustments in the DTT RGU base.
Tele2 said the Swedish business segment is undergoing a period of restructuring to focus on higher margin, network-based ICT services, regain revenue growth and make structural cost savings. It added 17,000 mobile RGUs and mobile corporate ASPU was SEK 168, down from SEK 171 in the first quarter.
Business revenue fell by 3 percent to SEK 1.60 billion, with end-user service revenue shrinking by 4 percent to SEK 1.01 billion. Total end-user service revenue declined by 4 percent, driven by price erosion on the mobile and fixed data market and declining demand for legacy fixed voice services, but partly offset by growth in Network as a Service and cloud PBX products. Underlying EBITDA excluding IFRS 16 increased by 4 percent amid cost reductions to SEK 335 million.
There was intense competition in the public sector segment as operators focus on defending existing contracts and the number of appeals in public tenders have increased, causing delays in implementation. The SME segment continues to be competitive with fighter brands offering consumer-like pricing to SOHO customers. Tele2 continued its positive trend in RGU growth, driven by the large enterprise segment.
