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Tele2 pulls financial guidance as coronavirus and TV decline takes toll

Nordic telco and cable operator Tele2 has withdrawn its financial guidance for the year and postponed a planned share dividend after admitting that it would be unlikely to achieve revenue growth, leading to a sharp fall in the company’s stock price.

Anders Nilsson

Tele2, which provides fixed and mobile services and TV in the Nordic and Baltic region and which owns Swedish cable operator Com Hem, said it was suspending its financial guidance for 2020 due to uncertainty related to the coronavirus pandemic while maintaining mid-term guidance.

The company posted revenues of SEK6.7 billion (€616 million) for the first quarter, down 1% year-on-year. Underlying EBITDAaL was SEK2.2 billion, also a decline of 1%, with investments in new initiatives such as streaming service Com Hem Play+ offsetting cost savings elsewhere.

Digital TV revenues in Sweden for the first quarter were down 6%, which, along with a sharp decline in fixed voice, offset gains in mobile post-paid and fixed broadband sales and solid growth in the Baltic states.

Tele2 lost 15,000 digital TV revenue-generating units in the quarter, driven by the continued decline of the Boxer digital-terrestrial base and a spike in churn following its temporary shutdown of Telia-owned TV4’s channels in December – a move that is entwined in a dispute over streaming rights.

The TV revenue decline also reflected the impact of temporary discounts granted to compensate for the loss of TV4 channels.

Tele2 CEO Anders Nilsson said that the company was now shifting its focus for this year from revenue growth to cost-cutting, scaling down some initiatives while fast-tracking part of the company’s planned long-term cost reductions

Nilsson said that strategic initiatives such as Com Hem Play+ and no-frills fixed-mobile convergence offering Penny had led to to about SEK50 million of additional operating expenditure in the quarter, offsetting cost savings.

However, he said, Tele2 would “carry on with strategic initiatives that create value in the long term” including Com Hem Play+, Penny and broadband offering Comviq. He said that these initiatives would help the company achieve its mid-term guidance.

Tele2’s poor showing disappointed investors who have looked to telecoms as a relative bastion of stability during the crisis. Rival Telia, which had earlier admitted that its EBITDA and cash-flow targets would not be met due to the coronavirus pandemic, has been seen as more vulnerable because its ownership of free TV assets in the form of TV4 expose it more to the precipitate decline in advertising revenues.