CEO Letter Q4 2021
“Hope springs eternal” illustrates the realities caused by the pandemic in 2021. At the beginning of the year, we were not sure what to expect and life taught us a few lessons on the way. Having said that, 2021 was a good year for Tele2 in several ways. As business progressed over the year, we were able to lift our guidance and we are now pleased to announce that we have delivered on these increased targets and that we have created a business that enables us to reiterate our mid-term targets. Further, we have finalized the recruitments for our leadership team, and I am pleased to report that Tele2 is now led by a group of people with diverse backgrounds with respect to nationalities, gender, and business experience.
At the Capital Markets Day in May, I presented the mid-term ambitions for Tele2. We have come far in building a foundation for growth by improving the business. As we look forward to life beyond the pandemic, we expect enduser service revenue to grow low-single-digit and underlying EBITDAaL to grow mid-single-digit on a Group level in 2022 and in the mid-term. End-user service revenue growth will be supported by all countries as we leverage the continued performance in the Baltics and return to growth in Sweden. Underlying EBITDAaL growth will be supported by top-line growth and improved value focus in our businesses.
As we have continuously pointed out, commercial activity and advertising were significantly reduced during the first half of 2021, but we have focused on bringing sustainable growth back in the second half of the year, leading to some investment in the market. Hence, we expect year over year profitability trends to be more favorable from the summer of 2022.
In 2021, we achieved annual run-rate of cost savings of SEK 500m stemming from the Business Transformation Program. In 2022, we will carry out the major IT-migration elements, which will yield the largest cost savings and vastly improve operational efficiency. To further secure quality in these complex projects and enable stable commercial momentum, we are aligning our major customer base migrations with key commercial events in the business, to get the right sequencing. As a result, we will extend the deadline of the Business Transformation Program to end of H1 2023 from end of 2022 to facilitate that. This is purely a matter of timing and optimizing our ways to deliver on our mid-term ambitions. We are confident that we will achieve the target of minimum SEK 1bn in annualized run-rate savings by end of H1 2023 and we expect to realize most of these savings by the end of 2022. Further, we are confident that we can grow mid-single digit in underlying EBITDAaL during 2022, illustrating the underlying growth in the business.
In Sweden, the B2B turnaround continues as we achieved yet another quarter of top-line growth. This shows that we can move the focus towards increasing value for large customers while deriving volume from simplification and ease of use with smaller customers. In B2C, we have seen our more-for-more strategy support continued growth in mobile postpaid and fixed broadband throughout 2021. As we entered Q4, a quarter with higher market activity, we increased commercial spending to support further growth which successfully yielded material increases in mobile postpaid net intake. This hampered some of the underlying EBITDAaL growth in the quarter but created value for the long-term as we balance value and volume in our customer base.
In the Baltics, we continue to deliver strong results in terms of both end-user service revenue and underlying EBITDAaL. In Latvia, we acquired spectrum in the 700 MHz auction which, together with the 3.5 GHz band, allows us to begin the roll-out of 5G nationwide. The roll-out will be conducted in partnership with Nokia, who will also support us with nationwide 5G network roll-outs in Estonia and Lithuania once those spectrum auctions are completed.
Tele2 aims at delivering the best industry shareholder return and remains a strong cash-generating investment case. We will continue distributing realized cash to shareholders. The Board proposes an ordinary dividend of SEK 6.75 per share (SEK ~4.7 billion), paid out in two tranches in May and October in 2022. In addition, we aim to distribute the money from the T-Mobile Netherlands transaction in full, pending closing and receival of cash proceeds. We remain committed to maintaining leverage within the target range of 2.5-3.0x as we grow underlying EBITDAaL. We also reiterate our capex guidance of SEK 2.8-3.3bn annually, excluding spectrum and leases in 2022 and the mid-term, as we enter a period with full roll-out speed of 5G and remote-phy in Sweden as well as nationwide roll-out of 5G in the Baltics.
Tele2 is a growth company at heart, aiming to be the leading telco in the Nordic and Baltic region. We are witnessing positive results from our strategic initiatives, demonstrating the viability of our way forward. I am confident in our ability to succeed and deliver on our mid-term guidance and excited to continue building sustainable growth. Key to this success and positive outlook is the continued engagement and hard effort of our employees, who keep pushing on whether we are in the office or working remote. I would therefore like to thank all Tele2ers for taking us through 2021 in a great way!
President and Group CEO