Operator Tele2 announced steady progress towards completing mergers in the Netherlands and its domestic market of Sweden, as it revealed growth in Q1 earnings.
In its earnings statement, CEO Allison Kirkby (pictured) noted the operator held “constructive dialogues” with the European Commission regarding proposed tie-ups with T-Mobile Netherlands and Sweden-based fixed telephony, broadband and pay-TV provider Com Hem during the opening period of 2018.
Tele2’s proposed deal with T-Mobile (announced in December 2017) is needed to “create a stronger competitive force in a market where we faced intensified competition” from MVNOs and fixed mobile convergence bundles. Nevertheless, Kirkby noted Tele2’s offering in the country remained competitive during Q1 and the operator continued to “grow our mobile customer base, although at a lower rate than in previous quarters.”
The Com Hem deal was announced in January and will combine “two highly cash generative businesses with clear synergies to create a leading connectivity provider in the Baltic Sea region.” Tele2 revealed an updated financial framework for the merged business, pledging to distribute more than 100 per cent of equity free cash flow to shareholders through a combination of dividends and share repurchases. Kirkby said the policy “has the full support” of the companies’ respective boards.
Both mergers are expected to complete in the second half of 2018, she added.
The CEO delivered the update as Tele2 revealed growth in all key earnings metrics during the quarter.
Net profit increased 19 per cent year-on-year to SEK590 million ($69.6 million) as revenue rose 5 per cent to SEK6.2 billion. Mobile services contributed SEK3.3 billion to the total, an increase of 3 per cent year-on-year.
Kirkby said the operator’s Baltic Sea businesses (comprised of Sweden, Latvia, Lithuania and Estonia) “produced another quarter of excellent momentum” with an overall increase in mobile end-user service revenue of 8 per cent year-on-year.
Its Kazakhstan business generated a 21 per cent rise in mobile service revenue in local currency due to demand for mobile data, while Croatia “also accelerated its growth rate into the double digits.”
Tele2’s business in Germany recorded a 14 per cent drop in mobile end-user service revenue, attributed to a decline in its customer base.