Release Date: January 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tele2 AB (TLTZY, Financial) achieved a 3% growth in end-user service revenue and a 2% increase in underlying EBITDA for the full year 2024.
- The company successfully completed the migration of Boxer TV customers to more modern technologies, which is expected to enhance customer experience and profitability.
- Tele2 AB (TLTZY) maintained a strong performance in the Baltic region, with a 7% growth in end-user service revenue and a 6% increase in underlying EBITDAaL.
- The company plans to distribute 100% of its 2024 equity free cash flow through an ordinary dividend, reflecting a commitment to shareholder returns.
- Tele2 AB (TLTZY) is implementing a transformation plan aimed at improving profitability through cost discipline and organizational simplification, with expectations of higher equity free cash flow in 2025.
Negative Points
- Equity free cash flow decreased by 7% in 2024 compared to 2023, indicating financial challenges.
- The company plans a significant workforce reduction of around 15%, which may impact employee morale and operational capacity.
- Swedish consumer end-user service revenue remained stable, with declines in Boxer TV offsetting growth in other areas.
- The company faces economic headwinds in the Swedish business sector, affecting growth potential.
- Tele2 AB (TLTZY) anticipates a SEK200 million revenue decline from Boxer TV in 2025, with no EBITDA impact, due to the migration away from legacy technology.
Q & A Highlights
Q: Can you elaborate on the impact of the Boxer TV migration on Tele2's 2025 financial outlook and the structural growth outlook for Sweden?
A: Jean Marc Harion, CEO, explained that the migration of Boxer TV customers to cable and IP-based technologies was necessary to avoid future losses. The revenue impact in 2025 will be SEK200 million less than in 2024, but this will be neutral or positive for EBITDA. The Swedish market is expected to stabilize, with consistent growth in mobile and fixed services. Hendrik de Groot, CCO, added that the DTV business line is expected to stabilize post-migration, and the connectivity market outlook is stable.
Q: How does Tele2 plan to manage CapEx and dividends in light of the 2025 guidance?
A: Jean Marc Harion stated that the CapEx to sales ratio is expected to be around 13% in 2025, lower than in 2024, due to the completion of the 5G rollout and reprioritization of investments. The focus will be on impactful customer investments. The midterm ambition remains to reduce CapEx to sales to between 10% and 12%. The dividend decision will be based on the equity free cash flow generated, with the Board recommending a distribution of 100% of the 2024 equity free cash flow.
Q: What are Tele2's strategic priorities for accelerating service revenue growth across mobile, broadband, and TV?
A: Hendrik de Groot highlighted the continuation of hardware bundling with 5G, expanding broadband footprint, and introducing new portfolios as growth drivers. The focus will be on customer loyalty, cross-selling, and driving FMC penetration. Stefan Trampus, EVP B2B, mentioned that mobile growth and solutions driven by networking will continue, with improvements in fixed services following copper decommissioning.
Q: Can you provide more details on the cost-cutting measures and their expected impact on EBITDAaL growth?
A: Jean Marc Harion explained that the workforce reduction of 15% is a major part of the transformation, focusing on support functions and back offices while maintaining frontline staff. The transformation includes simplifying processes, improving profitability in less profitable business areas, and enhancing cost discipline. Charlotte Hansson, CFO, added that the SEP program continues, but the new transformation plan builds on top of it, aiming for mid- to high-single-digit organic growth in underlying EBITDAaL.
Q: How does Tele2 plan to leverage its relationship with Iliad, and what are the implications for the company's leverage ratio?
A: Jean Marc Harion stated that Tele2 leverages Iliad's scale for best practices and vendor negotiations, benefiting from Iliad's experience. Regarding leverage, Charlotte Hansson reiterated that the financial policy remains unchanged, with a target range of 2.5 to 3 times net debt to EBITDA, providing optionality for future opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
