HELSINKI, Finland-Tele2, the Stockholm, Sweden-based pan-European telecom company, has surprised market analysts by reporting an operating profit of 1.5 billion Swedish kronors (US$182.7 million) on operating revenue of 31.28 billion kronors (US$3.9 billion) in the 2002 fiscal year. Growth in revenue, which rose 25 percent or 6.1 billion kronors (US$762 million) above the level attained in 2001, exceeded all expectations.
The Swedish company was not expected to generate a profit until the 2003 financial year, at the earliest. For 2001 the company reported an operating loss of 1.36 billion kronors (US$170 million) returned on revenue of 25.1 billion kronors (US$3.1 billion).
As a result of the better than forecast results, Tele2’s board has decided to pay out its first dividend to shareholders this year, a determination that went down well with investors and caused Tele2’s shares to gain 7 percent in value, rising to US$29.60 per share in New York and Stockholm.
Tele2’s full-year 2002 pre-tax profit rose to 2.74 billion kronors (US$342 million), up from 796 million kronors (US$99.5 million) in 2001. A notable highlight of the 2002 financial year was Tele2’s performance during the fourth quarter when the company posted an operating profit of 315 million kronors (US$39.3 million). This contrasts with an operating loss in the order of 225 million kronors (US$28.1 million) during the fourth quarter of 2001.
The net customer intake in the fourth quarter of 2002 amounted to 746,000 new customers.
“Our priority now is to maintain a balance between customer growth and profitability in relation to cash flow generation,” said Lars-Johan Jarnheimer, Tele2’s president and chief executive officer (CEO).
Tele2 increased the number of mobile customers in Sweden by 19 percent to 3 million in 2002 and now poses a serious challenge for the market leader TeliaSonera.
“This report from Tele2 adds to a series of strong reports and results that trigger valuation upgrades. Their organic sales growth in Sweden shows the company to be highly effective and well managed,” said Fredrik Danielsson, a senior telecom analyst with investment bank Carnegie in Stockholm.
Tele2 holds one of the four third-generation (3G) mobile telephony licenses issued by the Swedish state regulator, PTS. The company has joined forces with TeliaSonera to build a shared network and reduce infrastructure costs.
Last November, Tele2 decided to hand back its Norwegian 3G license, a decision the company estimates will reduce its investment bill in Scandinavia by US$520 million during the next two years. Instead, Tele2 intends to rent 3G network capacity from Telenor.
