Tele2 looks to a post-pandemic world after solid Q2

Tele2, the self-styled "Baltic Sea challenger," was in buoyant mood today as it unveiled another set of solid quarterly results and presented an ambitious objective to become the "leading telco in the Nordic and Baltic region."

The Sweden-based operator has even started to talk about a post-pandemic future, and said there were already fewer headwinds related to the pandemic in the second quarter (Q2) of 2021. Indeed, after reporting 6% growth in Q1, Tele2 said EBITDAaL grew by a stronger rate of 8% year-on-year in Q2, to reach 2.4 billion Swedish kroner (US$277 million).

Service revenue rose by a more modest rate of 2% to SEK4.8 billion ($554 million), attributed to a strong performance in the Baltics and stabilization in Sweden. Total revenue increased by 1% to SEK6.6 billion ($762 million). The operator posted a net profit of SEK1.14 billion ($132 million) for the quarter.

Kjell Johnsen, CEO of Tele2, said the operator's strong performance in the first six months was primarily down to the strategies and plans it had put in place.

"We have successfully combined Tele2 and Com Hem into one premium brand and have started to execute on our new commercial strategies, already seeing some early positive signals as a result. Now that a post-pandemic society is on the horizon, we are recalibrating our business step by step towards a strong focus on growth," he said.

Tele2 said pandemic headwinds that impeded its growth over the past year have started to abate, noting that roaming revenue is now roughly at the same level and TV and prepaid mobile services are stabilizing.

However, Johnsen again warned that situation normal has not yet been reached: "Society as a whole is still in a pandemic mode with few store visitors and most companies, including Tele2, still working remotely. While this market environment is good for our margin as it keeps commercial cost down, we look forward to a return to normalcy so that we can regain commercial momentum," he said.

Johnsen also noted that the program, unveiled by Tele2 last year – and before Johnsen took the helm in September – to cut operational expenditure in Sweden by SEK1 billion ($119 million) within three years is on track.

"Our business transformation program is progressing according to plan, now at a run rate of SEK350 million, on track towards the target of an annualized run rate of SEK500 million at the end of this year and at least SEK1 billion at the end of 2022," he said.

Improved outlook

Johnsen did warn that while Tele2 recorded strong growth in underlying EBITDAaL during the first half of 2021, "we do not expect to maintain the same run-rate for the second half as we want the flexibility to invest in sustainable growth so that we can hit the ground running in 2022."

That being said, he added, the outlook for both end-user service revenue and underlying EBITDAaL looks better for the full year than Tele2 anticipated back in February, "leading us to raise our guidance for 2021."

Financial guidance for 2021 has now been updated to flat to low single-digit growth in end-user service revenue (previously flat), mid-single-digit growth in underlying EBITDAaL (previously 2-4% growth) and capex excluding spectrum and leasing assets of SEK2.8 million–SEK3.3 billion (unchanged).

Johnsen also welcomed the appointments this week of Charlotte Hansson as CFO and Hendrik de Groot as new CCO. "Charlotte brings broad and valuable experiences from a number of industries while Hendrik is the commercial FMC expert we need," he said.

Tele2 certainly has its work cut out if it is to achieve its objective of becoming the "leading telco" in its region, with operations in Sweden, Estonia, Latvia and Lithuania.

Telenor, which operates in the Nordics as well as some Asian markets, reported revenue equivalent to around $3.1 billion for the first quarter of 2021. Telia, which has operations in the Nordics and Baltics, reported revenue equivalent to around $2.5 billion for Q1.

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— Anne Morris, contributing editor, special to Light Reading