Tele2 said it is reinstating its 2020 guidance and its proposal to distribute an extraordinary dividend of SEK 3.50 per share as it declared that it had fared relatively well in a difficult second quarter for the telecoms sector and society as a whole. Revenue fell by 2 percent and underlying EBITDAaL rose by 4 percent. The operator said it now has 242,000 fixed-mobile convergence (FMC) customers and that it launched Sweden’s first public 5G network during Q2.
In the second quarter, end-user service revenue fell by 2 percent year on year on an organic basis to SEK 4.86 billion, mainly because of the negative effects of Covid-19. Revenue dropped by 2 percent, too, to SEK 6.65 billion.
Underlying EBITDAaL was up by 4 percent on an organic basis to SEK 2.27 billion because of cost reductions from 2019 and action to mitigate the pandemic impact.
Profit after financial items (EBT) was SEK 1.06 billion, up from SEK 311 million in Q2 2019 when there was an impairment at Tele2 Estonia.
Net profit from total operations was SEK 895 million (SEK 1.29 per share), down from SEK 2.13 billion from Q2 2019, which had included capital gains from the divestment of the Kazakhstan operation at SEK 1.6 billion.
Equity free cash flow from continuing operations was SEK 974 million in the second quarter compared with SEK 1.10 billion a year earlier. Equity free cash flow from continuing operations for the last twelve months was SEK 5.3 billion or roughly SEK 7.70 per share.
The operator has reinstated its financial guidance for 2020 of underlying EBITDAaL coming in roughly flat compared with 2019, and capital expenditure excluding spectrum and leases at SEK 2.5–3.0 billion. Tele2 reiterated its mid-term guidance.
The extraordinary dividend is subject to approval at an Extraordinary General Meeting likely to be held in September. The proposal had not been put to May’s AGM after all, pending more visibility of the impact of coronavirus.
Tele2 said its strong balance sheet and resilient business model even in volatile times have led the board to reinstate the proposal. The total pay-out will be approximately SEK 2.4 billion. If approved, the extraordinary dividend is expected to be paid on 07 October 2020, together with the second tranche of the ordinary dividend, which remains SEK 2.75.
Tele2 quantified the negative effect of Covid-19 on underlying EBITDaAL at SEK 135 million at group level, comprising SEK 95 million in Sweden and SEK 40 million in the Baltic region. This was caused by lower international roaming, declining equipment and mobile prepaid sales, and the suspension of premium sports on TV.
Even so, underlying EBITDAaL was up by 4 percent at group level, with a 3 percent increase in Sweden and 8 percent in the Baltic region. Underlying EBITDAaL was supported by last year’s synergies, which had an annualised run-rate of SEK 800 million at the end of 2019, translating into SEK 200 million of underlying EBITDAaL on a quarterly basis. Since Tele2 reinvested some of the roughly SEK 100 million of synergies that we realised in Q2 2019, the net effect compared with last year was more than SEK 100 million this quarter.
Group organic end-user service revenue (EUSR) fell by 2 percent in the second quarter, with Baltic EUSR up by 6 percent while but a Swedish decline of 3 percent. In Sweden, consumer EUSR dropped by 2 percent as continued growth in mobile postpaid of 4 percent and fixed broadband of 5 percent was offset by declining mobile prepaid (-11%), digital TV (-12%), and fixed telephony & DSL (-21%).
Consumer mobile postpaid remained resilient with a net intake of 18,000 revenue generating units (RGUs). Average spend per user (ASPU) declined by 1 percent compared to Q2 2019 despite an approximately 3 percentage point headwind from roaming.
There was a net intake of 10,000 fixed broadband RGUs and slight ASPU growth, in line with pre pandemic trends. Mobile prepaid suffered a net loss of 41,000 customers as lower traffic to retailers and lack of tourism hit sales. The decline in EUSR from digital TV accelerated amid lower sales and the suspension of premium sports packages, leading to an ASPU decline of 8 percent.
Following product improvements in 2019 such as upgrades to broadband speed and mobile data, Tele2 continued to make backbook price adjustments on some of the fixed broadband and mobile postpaid customer base in the second quarter. It reached roughly half of the total expected effect from price adjustments in the Q2 results and expects to reach the full effect in Q3. It has told almost all its affected customers already and sees limited impact on churn.
Swedish business EUSR declined by 6 percent amid price pressure, lower international roaming revenue, lower contract activation during the pandemic, and continued fall in legacy fixed services.
