CEO WORD Q3 2017


The third quarter was a test of our ability to operate in a dynamic environment, as we saw the full effect of Europe’s new roaming regime, the new Dutch consumer credit regulation and our new service offerings which we launched across our markets in the first half of 2017. Mobile end-user service revenue grew by 7 percent, like-for-like, despite the impact of Roam Like at Home, and I am particularly pleased to see how consumers across our footprint are embracing the new mobile offerings. This, combined with our challenger cost structure focus, drove strong business momentum.

We can now raise our full-year EBITDA guidance to SEK 6.4–6.6 billion, despite excluding the contribution of SEK 0.2 billion from Tele2 Austria, which we agreed to sell in the quarter. The sale of our Austrian operations follows a strategic choice to focus even more on opportunities in markets where we can be the customer champion of connectivity on our own infrastructure and build profitable and scalable market positions.

Our established Baltic Sea Challenger business as a whole – including Sweden and the Baltics – delivered operating cash flow of SEK 4.4 billion on a rolling 12 month basis, an increase of 22 percent despite the regulatory headwind.

In Sweden, consumer mobile end-user service revenue grew 1 percent driven by increasing data consumption, despite the impact of Roam Like at Home. We received more evidence of the strength of our price fighter brand position as Comviq was named the strongest telecom brand in Sweden by Evimetrix Swedish Brand Award, based on customer satisfaction and brand awareness. In our B2B operation, as expected, net sales fell by 2 percent in a price competitive market where we are yet to recover from a period of weak customer additions in previous quarters. Synergies from the integration of TDC continue to be ahead of plan as cost savings from the terminated MVNO contract are now fully realized.

In the Baltics, mobile end-user service revenue grew 11 percent in local currency, driven by the popularity of our brands and products, a continued rise in smartphone penetration and a strong increase in data consumption.

Our Investment Markets of Kazakhstan, the Netherlands and Croatia all delivered high growth levels, with a strong, revenue-driven improvement in EBITDA, and a further acceleration towards cash flow breakeven. The negative operating cash flow, which was SEK -0.6 billion on a rolling 12 month basis in Q3, has declined by more than two thirds since its peak in Q2 2016.

It is now five months since we launched our new, disruptive product portfolio in the Netherlands and it is clear from both a revenue and a Net Promotor Score perspective, that we are gaining strong traction from Dutch consumers and businesses, despite a tough competitive environment. Our mobile net additions increased versus last quarter to 57,000 and our mobile end-user service revenue grew by 26 percent in local currency. In the absence of anything extraordinary, we now expect a positive EBITDA for Tele2 Netherlands also in the fourth quarter.

Tele2 Kazakhstan continues to make excellent progress, as strong growth in mobile end-user service revenue coupled with further integration benefits increased the EBITDA margin for the quarter to 26 percent, up from 14 percent a year earlier.

In our pursuit to fearlessly liberate people to live a more connected life, we are acutely aware of our responsibility to protect and support the communities we operate in, especially when it comes to children. During the quarter, our entire Leadership Team set aside two days to bike from Riga to Vilnius, to visit Baltic customers and raise proceeds for SOS Children’s Villages. Furthermore, as part of our work to make children’s online life safer, we commissioned an important research report on the everyday internet experiences of children in Sweden and the Baltics, available at our corporate website.

Looking forward, in addition to the revision of our EBITDA guidance, we are reducing our CAPEX forecast for the year. The third quarter was unusually low with regard to CAPEX, and we do not expect to fully catch up with the previous full-year CAPEX forecast before year-end. This has contributed to strong free cash flow, which now at SEK 2.3 billion for the first nine months is increasingly likely to fully cover our dividend for 2017. As we earlier assumed dividend cover only in 2019, our Board of Directors will now review our dividend policy for 2018 and beyond in connection with our full-year results. With the balance sheet strength we are now seeing, and dependent on the closing of the sale of Tele2 Austria, we will also review means beyond the ordinary dividend to return these proceeds to shareholders.

To conclude, I am extremely proud that as a company we are increasingly able to combine a relentless focus on driving strong business momentum, in a responsible manner, as we pursue our mission to liberate people to live a more connected life. This, we believe, is the way to sustainable value creation for our shareholders, our employees, our customers and the world around us. 

 

Allison Kirkby
President and CEO