Today's Comment: Tele2's second-quarter revenues up 10%; Polish MTRs set to be slashed; UK telecoms user figures.
- Tele2's second-quarter revenues grew 10% year-on-year, as key growth in Russia and Norway offset a flat performance in its home Swedish market.
- Tele2 was bullish despite an EBITDA slump, saying it was on track to hit the top end of its 2012 subscriber target of 22 million in Russia—its key growth market.
Today we focus on three developments:
- Tele2 Sees Earnings Fall Due to Competition: Tele2 has revealed its second-quarter revenues grew 10% year-on-year (y/y) to 11.06 billion Swedish kronor (USD1.59 billion), as key growth in Russia and Norway offset a flat performance in its home Swedish market. However, Tele2's second-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) fell 3% y/y to SEK2.72 billion, due to falling consumer prices amid increased competition across its Western European markets. Operationally, Tele2 saw its total mobile customer base grow 15.9% y/y to reach 33.5 million at the end of June 2012, due to just under 10% y/y growth in Russia, and a near-doubling of users in Norway. In the fixed-line sector, subscribers fell 1.78% y/y to 3.42 million, due to ongoing declines in the fixed telephony sector, notably in Sweden and Germany.
Tele2 Second-Quarter 2012 Revenues by Region
% Change (y/y)
- Polish MTRs: The Polish regulator, UKE, is targeting reducing mobile termination rates (MTRs) down to PLN0.04 per terminated minute, reports Parkiet, quoting UKE President Magdalena Gaj. The reductions were planned for July has been delayed by intervention from the European Commission (EC). One of Gaj's first priorities upon commencing work at the UKE has been to eliminate MTRs within two years, viewing the fees as anticompetitive. The rates are currently set at PLN0.12 for the largest three operators, so operators must brace themselves for a substantial drop in revenue (see Poland: 8 February 2012: Polish Regulator Aims to Eliminate MTRs in Two Years).
- SMS Overtakes Calls As Most Popular Way to Stay in Touch in the UK: The United Kingdom regulator has revealed that SMS use has passed mobile voice calls as the most frequent way of keeping in touch in the country, as some 58% of users communicated via texts on a daily basis in 2011, while only 47% made a daily voice call. Regulator Ofcom also revealed the average UK consumer sent 50 texts per week, more than double from four years ago, with over 150 billion text messages sent in 2011. Users spent 90 minutes per week using a mobile to access the Internet, while fewer phone calls are being made on both fixed and mobile phones, with a 10% fall in the volume of calls from landlines, and a fall in the volume of mobile calls of just over 1%, for the first time ever. Ofcom also stated that 39% of UK adults owned a smartphone at the end of 2011.
Tele2 was bullish about the results, despite the earnings slump, saying it was on track to hit the top end of its 2012 subscriber target of 22 million in key growth market Russia, although it conceded that revenue growth in Sweden would likely be in the range of 3%-4%, against earlier expectations for 3%-5%, adding that conditions were increasingly competitive in its home markets. In Sweden, Tele2 reported a sharp 22% y/y fall in EBITDA in the second quarter, as the mobile market shift to data bundles and smartphones raised sales and marketing costs. However, the operator managed to reverse the negative trend in mobile consumers, growing its subscriber base 1.6% y/y for a total 3.761 million at the end of June, while Tele2 continues to aggressively roll out LTE services in the region targeting 99% coverage of the Swedish population by the end of 2012 (see World: 28 June 2012: Early Bird LTE Operators—June 2012 Update) Elsewhere, Tele2 recently announced that it has selected Nokia Siemens Networks (NSN) for its LTE deployment in Estonia, Latvia, and Lithuania (see Estonia: 26 April 2012: Analyst Commentary).
Elsewhere, Tele2 is seeing its growth engine, Russia, being joined by Kazakhstan. Tele2 reported subscription growth of 10% y/y in Russia to 21.6 million subscribers, while its Kazakh unit registered growth of 271% to 2.46 million. Strong subscription growth was eclipsed by revenue performance with Russia accounting for SEK6.33 billion, up 16% y/y, in the six months. While Kazakhstan revenues grew 461% y/y to SEK393 million, already beating the full year result for 2011. Despite growth in Russia Tele2 faces significant challenges; it remains without 3G or LTE licences, having missed out in the recent LTE auction. To provide advanced data services Tele2 Russia will have to look towards refarming its 1,800-MHz spectrum, or participate in regional LTE tenders (see CIS: 13 July 2012: Analyst Commentary). In Kazakhstan IHS Global Insight expects that growth will accelerate throughout the remainder of 2011 with the unit recently reaching coverage all of the regions. Expanded geographical reach will help Tele2 Kazakhstan to hit its breakeven EBITDA target by 2013; EBITDA for the first half of 2012 stood at a loss of SEK202 million largely due to the high levels of investment required to keep up its deployment schedule (see Kazakhstan: 18 June 2012: Analyst Commentary).
- Indian government releases DPCO 2013, expanding price controls to 652 drugs
- Key US data releases and events
- Budget 2014: US administration signals greater willingness to compromise
- Mercedes-Benz unveils important new S-Class
- Kremlin power struggle becomes evident as influential Russian political ideologue resigns
- GDP, inflation, retail sales, public finances, and Bank of England minutes all feature in UK Economic Week starting 20 May
- Global Economic Impact of the Japanese Earthquake, Tsunami, and Nuclear Disaster
- Consumer spending and export recovery drive Japan's GDP growth in Q1
- Slow start to 2013 highlights ongoing economic challenges in Vietnam
- Chinese vehicle sales and production rise to over 2 mil. units in March, Q1 sales up 13.2% y/y – CAAM