Tele2 Q2 profit tumbles on Netherlands LTE investment, one-off costs

Tele2 endured what Jefferies analysts called a "messy" second quarter, as one-off costs drove down EBITDA and resulted in a 60 per cent year-on-year drop in net profit.

The operator generated a profit of SEK60 million (€6.3 million/$6.9 million) in the second quarter of 2016 compared to SEK309 million in the same period of 2015. EBITDA fell 22 per cent year-on-year to SEK1.08 billion, which Tele2 president and CEO Allison Kirkby said was due to the cost of rolling out LTE in the Netherlands, as well as higher sales and marketing expenditure in Sweden, the operator's domestic market.

Jefferies analysts said Tele2's second-quarter EBITDA was some 5.1 per cent lower than it forecast, but noted that the figure contains "negative one-offs of SEK51 million in Sweden," and conceded its prediction included an "overly optimistic assumption in 'other operations'."

Overall, Tele2's EBITDA was 1.7 per cent lower than consensus predictions, Jefferies stated in a research note emailed to FierceWireless:Europe.

Kirkby said the operator expected second-quarter EBITDA to decline due to the investment in its Dutch 4G network. She noted that the deployment "continues to have an impact on capex and group cash flow," but added that the impact is "balanced by strong cash generation in our established Swedish and Baltic businesses."

The operator grew its net sales 1 per cent year-on-year to SEK6.6 billion, with gains in all markets except Sweden, Austria, and Germany.

Figures for the six months to end-June showed similar trends. Comparing to the first half of 2015, net sales remained stable at SEK13.1 billion, EBITDA declined 18 per cent to SEK2.3 billion, and net profit fell 42 per cent to SEK279 million.

Tele2 reiterated its full-year earnings guidance, which target net sales of between SEK26 billion and SEK27 billion, and EBITDA of between SEK4.6 billion and SEK5 billion. The operator aims to outlay between SEK3.7 billion and SEK4.1 billion in capex through 2016.

For more:
- see Tele2's earnings report (PDF)
- view Allison Kirkby's comments

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