Tele2 Q3 2024 Earnings Report
Tele2 (ST:TEL2b) (TEL2), a leading telecommunications provider, has maintained its growth trajectory in the third quarter of 2024, marking its 14th consecutive quarter of growth with a 3% increase in end-user service revenue.
CEO Transition
President and Group CEO Kjell Johnsen, who announced his departure after four years, reported a 2% increase in underlying EBITDaL and solid SEK 1.1 billion in equity free cash flow. The company's financial leverage remained below the target range at 2.3 times. Notably, Tele2 launched Sweden's first Disney Plus bundle, enhancing its digital TV offerings. Jean Marc Harion is set to replace Johnsen as CEO.
Key Takeaways
- Tele2's end-user service revenue grew by 3%, with B2C and B2B sectors in Sweden seeing 1% and 2% increases respectively.
- The Baltics experienced a 7% revenue growth across all markets.
- Tele2 is on track to achieve SEK 600 million in cost savings by the end of 2026, with SEK 225 million already realized.
- The company's economic net debt decreased to SEK 24.6 billion.
- A focus on improving customer experience and efficiency, including a unified IT platform and digital channels, is a priority.
- Tele2's consumer business strategy includes growing mobile and fixed services integration, achieving a 26% penetration of FMC customers.
Company Outlook
- Tele2 plans to prioritize customer experience and sustainability initiatives.
- The company expects an energy cost headwind of SEK 40 million in 2024.
- CapEx to sales ratio is projected at 13%-14% in 2025 due to the final phase of 5G expansion.
Bearish Highlights
- The company noted a historic high in bankruptcies, along with the impact of rising interest rates on consumer purchasing power in Sweden.
- B2C mobile performance growth rates have declined due to pricing strategy changes and the reintroduction of handsets.
- Content costs, particularly for sports, have increased.
Bullish Highlights
- Tele2 is optimistic for a gradual economic improvement in 2025.
- The company's 5G services are receiving strong customer responses, covering over 80% of the population.
- Tele2's FMC strategy and handset binding in retail have led to customer acquisition improvements and churn reduction.
Misses
- No significant increase in run-rate savings is expected in Q4, though minor additions are anticipated.
- The company's EBITDA guidance remains unchanged for the full year due to uncertainty in volumes and trends.
Q&A Highlights
- Tele2 anticipates normalization in growth as pricing stabilizes throughout the year.
- The company is transitioning customers from DTT to OTT services by the end of 2023.
- Questions were addressed regarding the Comviq brand's pricing strategy and the more-for-more approach implemented.
Tele2's third quarter of 2024 has been marked by solid performance and strategic initiatives aimed at sustaining growth and improving customer experience. With the company's leadership transitioning and the continued rollout of 5G technology, Tele2 is positioning itself to adapt to the evolving telecommunications landscape while maintaining financial stability and operational efficiency.
Full Transcript Highlights
- The operator welcomed participants and announced Kjell Johnsen as the first speaker.
- Tele2 reported good end-user service revenue growth and stable performance across sectors despite macroeconomic challenges.
- Underlying EBITDaL grew due to end-user service revenue growth and savings from strategic executions.
- Contingent on solidifying their market position, Tele2 aims to enhance customer experience, supported by new initiatives and technology innovations going forward.
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