Tele2 (ST:) AB (TEL2-B.ST) enjoyed a strong start to the year, with a 4% increase in end-user services revenue and a 2% increase in underlying EBITDAaL in the first quarter. The company has launched a new three-year strategic program focused on improving customer experience and reducing costs, with the aim of saving SEK 600 million.
Tele2’s commitment to sustainability is evident in CDP’s Climate A rating and second place in Sweden for gender equality. A significant change is underway in the company’s ownership structure, as Kinnevik has agreed to sell its stake to Freya, who thus becomes the largest shareholder. The company’s leverage remains below target and has generated solid equity free cash flow.
Strengths
Tele2’s 1st quarter saw 4% growth in end-user services revenue and a 2% increase in underlying EBITDAaL. A new three-year strategy aims to improve customer experience and realize cost savings of 600 million SEK. Freya is set to become the largest shareholder after the sale of shares in Kinnevik. The company has received a “Climate A” rating and is highly ranked for gender equality in Sweden. Tele2’s financial leverage is below the target range and the company has generated strong equity free cash flow. 5G network expansion is underway, covering nearly 70% of the population.
Company perspectives
Tele2 reiterates its medium-term guidance and outlook, with an expected CapEx/sales ratio of 13-14% in 2025, then returning to 10-12% from 2026. The company expects 90% high-frequency 5G coverage by the end of the year and is developing a fixed-mobile convergence strategy. Churn rates have increased slightly due to price increases, but customer satisfaction remains high.
Bearish highlights
Slight increase in churn due to recent price increases. Negative growth in Latvia, although price adjustments are expected during the year. Restructuring costs of SEK 180 million were booked, mainly related to the reduction of resources.
Bullish strengths
Strong growth in the B2C and B2B segments, especially in fixed broadband, mobile postpaid and IoT. Successful organizational changes and network optimizations have already contributed to savings of SEK 80 million. The company is confident in its network strategy and IT improvements and expects to maintain strong cash flows.
Shortcomings
The company has experienced negative growth in Latvia, but plans to address the issue with future price adjustments.
Highlights from the questions and answers
CEO Kjell Johnsen discussed the impact of price increases on growth rates and the potential improvement in consumer prospects later this year. The company’s focus on building the best 5G network and achieving security compliance. Operating leverage is expected to come from outperformance in mobile and broadband and the success of initiatives such as TV and TiVo migration.
Tele2 AB has defined a solid strategy for the coming years, focusing on improving customer experience, expanding the 5G network and maintaining financial discipline. The company’s leadership is optimistic about the future, with a clear vision of improving network coverage and IT capabilities. With a strong balance sheet and a commitment to sustainability, Tele2 is poised to continue its growth trajectory in the competitive telecommunications market.
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