GICS Sector : Communication Services
Tele2 AB (publ), a telecom operator, provides fixed and mobile connectivity and entertainment services in Sweden, Lithuania, Latvia, and Estonia.The company offers mobile telephony and data, fixed broadband, fixed telephony, switch and contact center, cloud services, IT services, network services, workplace, video and collaboration, and security services.It also provides data network services, including dark fiber, dedicated wavelength, ethernet and IP VPN, and internet services; and unified communications comprising service provider, mobile virtual network operator, and carrier SIP-interconnect services.
Tele2's financial performance in Q4 2025 was impressive, with end-user service revenue growing 4% and underlying EBITDAaL increasing 13% for the third consecutive quarter. The company's EPS came in at 1.76, beating estimates of 1.62. Revenue growth was driven by a 4% organic increase in total revenue, fueled by service revenue and equipment revenue growth. The company's underlying EBITDA margin expanded thanks to sharp cost control, a testament to the effectiveness of its transformation efforts. "We are, of course, very happy with the sequential improvement in Q4, but I think we should be -- avoid to be too carried away of taking that as a single data point for looking at the full year 2026," said Peter Landgren, Group CFO.
Publication Date: Feb -09
The company's segment performance was mixed, with Sweden Consumer growing end-user service revenue by 2%, while Sweden Business grew 7%. The Baltic region delivered a 6% increase in end-user service revenue and a 16% rise in underlying EBITDAaL. The company's B2B segment saw good growth and demand in SMEs and the public sector, driven by the need for network and cloud modernization.
Tele2's 2026 guidance includes low single-digit organic growth of end-user service revenue and low to mid-single-digit organic growth of underlying EBITDAaL. The company's CapEx to sales ratio is expected to be in the range of 10% to 11%. While the guidance may seem conservative, the company is cautious about the macro environment and is not expecting any major changes in costs. The Tower Co transaction is expected to close in Q1 2026, and the company will own 50% of the entity.
Tele2's valuation metrics suggest a reasonable price for the stock. The P/E Ratio is 27.25, and the EV/EBITDA is 11.84. The Dividend Yield is 3.52%, and the Free Cash Flow Yield is 6.2%. The company's ROE is 21.35%, indicating a strong return on equity. With a Net Debt / EBITDA ratio of 2.25, Tele2's leverage is manageable.
The company's dividend policy is to distribute at least 80% of equity free cash flow. Leverage is expected to be around 2.6-2.7 after the Tower transaction. While the company is scanning the market for M&A opportunities, there are no deals on the table yet, particularly in the fixed business due to pending regulation. The company's goal is to create a successful business in the Tower Co, and it expects to close the transaction in Q1 2026.
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Tele2 AB's 1.2% growth in End-user Services is driven by increasing mobile data consumption, expansion into new markets, and strategic partnerships. Additionally, the company's focus on digital transformation, improved customer experience, and cost savings initiatives have contributed to this growth.
Tele2 AB's equipment segment growth of 0.8 is driven by increasing demand for 5G network infrastructure, expansion into new markets, and strategic partnerships. Additionally, the company's focus on cost savings and operational efficiency has enabled it to invest in growth initiatives, further boosting segment performance.
Tele2 AB's 1.1% growth is driven by increasing mobile data consumption, 4G network expansion, and cost savings from operational efficiencies. Additionally, the company's focus on digitalization, IoT, and 5G investments are expected to contribute to future growth. Furthermore, the operator's strong market position in Sweden and the Baltics provides a solid foundation for continued growth.
Tele2 AB provides mobile services including voice, data, and SMS to individuals and businesses across Sweden, Estonia, Latvia, and Lithuania.
Tele2 offers fixed broadband services, providing high-speed internet access to homes and businesses.
Tele2 provides TV services, offering a range of channels, on-demand content, and streaming capabilities.
Tele2 offers IoT solutions, enabling businesses to connect and manage devices, and collect and analyze data.
Tele2 provides cloud services, including infrastructure, platform, and software as a service, to businesses.
Tele2 offers security services, including threat detection, incident response, and security consulting.
Tele2 AB (publ) operates in a highly competitive industry, but the threat of substitutes is mitigated by the high switching costs for customers and the lack of viable alternatives.
Tele2 AB (publ) has a large customer base, but the bargaining power of customers is high due to the availability of alternative service providers and the ease of switching.
Tele2 AB (publ) has a diversified supplier base, and the bargaining power of suppliers is low due to the availability of alternative suppliers and the company's significant purchasing power.
The threat of new entrants is moderate due to the high barriers to entry in the telecommunications industry, including the need for significant capital investment and regulatory approvals.
The telecommunications industry is highly competitive, with multiple players competing for market share, leading to a high intensity of rivalry.
| Value | |
|---|---|
| Debt Weight | 55.72% |
| Debt Cost | 4.10% |
| Equity Weight | 44.28% |
| Equity Cost | 5.03% |
| WACC | 4.51% |
| Leverage | 125.84% |
Value: 8.1
Growth: 4.8
Quality: 6.5
Yield: 6.9
Momentum: 6.5
Volatility: 9.0
1-Year Total Return ->
Value: 9.1
Growth: 3.4
Quality: 5.2
Yield: 8.8
Momentum: 6.5
Volatility: 6.7
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Value: 4.9
Growth: 3.3
Quality: 5.7
Yield: 8.8
Momentum: 7.0
Volatility: 10.0
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Value: 4.0
Growth: 4.0
Quality: 5.9
Yield: 7.5
Momentum: 6.0
Volatility: 10.0
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Value: 6.2
Growth: 3.2
Quality: 7.7
Yield: 9.4
Momentum: 2.5
Volatility: 8.3
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Value: 3.4
Growth: 3.2
Quality: 6.1
Yield: 8.8
Momentum: 8.5
Volatility: 3.0
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