Tele2 Delivers Another Quarter of Growth in a Challenging Environment

Narrow-moat Tele2's third quarter seemed like a repetition of the second quarter, with low- to mid-single-digit growth in sales and EBITDA after leases, and the company being well positioned to reach its full-year objectives. Overall, service revenue grew 3.5% organically, compared with 3% last quarter. Although the company’s cost-saving programme helped to partially offset inflationary pressures, energy costs wiped out 3% growth in EBITDAaL (its EBITDAaL grew by 1.5% and would have grown 4.5% without changes in energy prices). Tele2 remains one of our preferred picks among European telecom companies given the stability of its end markets and an adequate dividend policy, with growing ordinary dividends coupled with extraordinary ones when there are earnings surprises or asset sales. The company is also doing a good job of keeping costs under control. We maintain our SEK 115 fair value estimate.