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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
COMMUNICATIONS
- Tele2 report on Monday; company-provided consensus is looking for rev +2.7% YoY, end-user service revenue +3.8%, underlying EBITDAal +3.3%, CapEx +10.7%, FCFe -6.2%, leverage 2.44x from 2.34x at Q1.
- Q1 results were broadly stable and in line with consensus. FY guidance was left unchanged at +3-4% for end-user service revenue, +1-3% underlying EBITDAal, 13-14% CapEx to Sales (from 13.5% for FY23).
- Equity has performed broadly in line since at +10% vs. +8.5% for SXKP. Spreads have also traded in line with peers over the period.
- Quite a stable credit in our view; revenue and EBITDAal grinding steadily higher against achievable albeit somewhat modest targets. FCF has returned to pre-FY22 levels after a period of temp weakness on increased inventories and supply chain issues; improvement comes despite elevated CapEx this year and next though consensus implies faith in the MT target of 10-12% of revenue from 2026. Below-target leverage (2.3x vs. 2.5-3x) opens the possibility of increased payouts or regional bolt-on acquisitions to strengthen their position within the competitive Swedish market though management has kept quiet on its intentions.
- Tele2 has maintained at BBB[S] at S&P since the rating inception in 2018; despite stable performance since then it seems that a rating upgrade is unlikely. At the last rating action in 2019, the 2.2x adj-leverage upside threshold seemed to correspond to 2x reported leverage which is unlikely to be hit given current financial policy. Upside is also attached to material market share or increased scale/diversification, unlikely to happen in the four-player Swedish market.
- There hasn’t been any news on a potential stake increase by Iliad; the now 36% owner would trigger CoC on all Tele2 bonds should it increase its stake to beyond 50% - longest-dated and low coupon EUR 31s with a cash price of EUR 85 would be the main beneficiary here (and clearly priced in a decent probability on Iliad’s stake purchase in Feb) though the 28s also trade at EUR 94 while the 29s sit basically at par. On a purely fundamental basis, the 28s and 29s spreads sit wider than the BBB Comms curve and screen attractive at these levels given the stability of the credit.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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