Jefferies analysts remain positive on Tele2, despite near 50% drop in Q3 net profit

Jefferies analysts appeared bullish on Tele2's third-quarter earnings, highlighting that the operator's EBITDA for the period came in almost 5 per cent ahead of expectations.

The Sweden-headquartered operator generated EBITDA of SEK1.5 billion (€159 million/$180 million) in the third quarter, a 5 per cent decline on the same period of 2014. However, Jefferies noted the 2015 figure was 4.6 per cent ahead of consensus estimates for the period, with the improvement driven by the operator's domestic and Kazakhstan businesses.

"Notably, the Swedish mobile result is on slightly accelerating end-user service revenue growth (+1.3 per cent year-on-year)" the analyst company noted in a statement emailed to FierceWireless:Europe.

While Jefferies conceded that Tele2 Sweden's third-quarter revenue growth is low, it explained that the "mild acceleration must be considered a success, given market concerns over the impact of controversial mobile tariffs launched in 4Q14 (with very large data buckets)."

Those tariffs led to a consensus among financial analysts of a marginal 0.3 per cent year-on-year rise in domestic revenues, Jefferies explained.

Tele2's domestic third-quarter revenues were better than expected due to a large rise in subscriber numbers. Jefferies noted the operator added 84,000 subscribers during the quarter, compared to 28,000 in the same period of 2014, before the new tariffs were launched.

Revenues in Kazakhstan "were 11 per cent ahead of consensus" the analysts noted. Tele2's earnings report reveals end-user service revenue in the country grew 36 per cent year-on-year to SEK348 million, driving an increase in EBITDA from SEK22 million in Q314 to SEK50 million in the recent quarter.

Jefferies also noted that Kazakh third-quarter EBITDA was double that of consensus estimates.

The investment bank also highlighted that Tele2 increased mobile revenue in the Netherlands during the third quarter, despite adding no new subscribers. Mobile revenues in the country grew 13 per cent year-on-year to SEK364 million, which Jefferies said is some 8 per cent higher than consensus predictions.

Despite Jefferies apparent bullishness on Tele2, the operator's overall third-quarter net profit fell 45 per cent year-on-year to SEK397 million.

Figures for the nine months to end September were similar, with net profit down 43 per cent year-on-year to SEK1.2 billion despite a 4 per cent rise in revenues.

Recently appointed CEO Alison Kirkby said that the company would continue to focus on being "the champions of customer value through innovation in data monetisation" moving forward, with a view to "continue to create sustainable and attractive returns for our shareholders."

For more:
- see Tele2's Q3 earnings statement (PDF)

Related articles:
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Tele2 hires 'veteran' James Maclaurin as interim CFO
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