CEO Letter Q1 2021
Our first quarter has been a story of disciplined focus and delivery in the face of pandemic headwinds. We managed to grow underlying EBITDAaL by 6 percent through continued execution on the business transformation program, operational discipline and impressive performance in the Baltics. While we are not back to normal yet, the future is now more predictable, giving us confidence that we can distribute an extraordinary dividend of SEK 3.00 while keeping a strong balance sheet.
Over the last 12 months, Tele2 has dealt with significant uncertainty in our markets caused by the pandemic as well as regulatory unpredictability. Around this time last year we shifted our focus to defending underlying EBITDAaL as a precaution. This was done successfully without interfering with our midterm ambitions and we have been able to continue distributing cash to our shareholders while maintaining a strong balance sheet.
While we are not out of the pandemic yet and still expect some headwinds for a few months, the future is now more predictable. This means that we can turn our focus back towards achieving growth later in the year and make necessary investments to prepare the company for the future. We are also very pleased that we can continue remunerating our shareholders while maintaining a strong balance sheet. In light of this, the Board has decided to propose an extraordinary dividend of SEK 3.00 per share this year and expects to call for an Extraordinary General Meeting to be held in June 2021. Pending shareholder approval, the extraordinary dividend will be distributed in July, 2021.
Our results this quarter reflect another period of successful cost control in the face of pandemic headwinds. We were able to deliver strong growth in underlying EBITDAaL, partly because of bad debt provisions in Q1 2020
giving a somewhat easier comparison, but also due to underlying spending discipline and continued delivery on our transformation program.
As expected, revenue trends were impacted by lower activity as our markets are under COVID-19 restrictions. However, we see clear signs of strength across the business, giving us comfort that we have a resilient business
model and that we are on the right strategic trajectory. Across our Baltic markets we see continued impressive performance despite complete lockdowns over extended periods of time. While Sweden B2B still faces structural headwinds, we see initial indications of improvement in both the Small and Large segments as a result of our efforts to rework our offerings.
In Sweden Consumer we see the strength of a value led strategy as tailwinds from last year’s more-for-more initiatives support continued growth in mobile postpaid and fixed broadband even in an environment where sales are affected by low market activity. We continued to execute on the morefor-more strategy during the quarter following product improvements such as upgrades to broadband speed and mobile data. We expect to see the effect on ASPU starting in Q2 2021 with the full effect in the second half of the year.
So far, we have driven FMC mainly by connecting separate brands and offering benefits to improve loyalty in the existing customer base. However, for this to really move the needle and drive sustainable growth we need to look beyond the existing customer base and drive organic FMC sales by establishing a leading FMC premium brand that can cater to the whole household. In the near future we will take the next step in our brand optimization journey and consolidate our premium consumer brands in Sweden into one. Over time, this will help us scale the benefits we see in our current FMC customer base as we solidify our position in the premium end of the market with a clear focus on FMC. Furthermore, we see this as a step back from unnecessary
brand proliferation in an already saturated Swedish market.
However, while the brand launch is a major commercial exercise it is just one step in a longer journey which involves migrating to an IT-architecture that enables both more commercial flexibility and significant cost reduction over time. It also allows us to create a whole new level of coordination and focus as we align all internal processes not only to drive sales and reduce complexity but also to improve the customer lifetime value by creating a unified customer experience from end to end.
In the coming quarters we will shift our focus back toward growth and execute on the necessary initiatives that will ensure success in a post pandemic world. We will take the next step in our brand journey to unlock the full potential of FMC in the Swedish consumer market. We will continue executing on our transformation program to support our commercial efforts and deliver on our cost reduction target of at least SEK 1 billion by the end of 2022. We will ramp up the 5G rollout which, along with the Remote PHY upgrade on the fixed network, will ensure that we can continue delivering a great service to our customers and maintain a premium position in the market. We will execute on our strategy to set Sweden B2B on the path to stabilization. With a solid plan in place, it is now time to execute and invest in growth.
President and Group CEO