Advanced Television

Com Hem Q2 revenue up 36%

October 17, 2017

Swedish multi-play operator Com Hem’s Q3 revenue saw a strong increase of 36 per cent to SEK 1,780 million (€186m) while organic revenue excluding Boxer rose by 3.6 per cent to SEK 1,357 million. Operating profit rose by 12.2 per cent to SEK 255 million.

Anders Nilsson, CEO, Com Hem Group, said in a statement: “In the Com Hem Segment we saw the strongest quarterly intake of unique customers, broadband RGUs and digital TV RGUs in several years. Our customer base grew by 11,000 in the segment and the number of RGUs increased by 14,000 with very strong growth in both broadband and digital TV, up 12,000 and 6,000 RGUs, respectively. Our TiVo base grew by 4,000 customers, (now 40 per cent of our DTV base). The number of telephony RGUs continued to decline, down 3,000, somewhat lower than in previous periods. The blended consumer ARPU declined by SEK 3 (0.8 per cent) sequentially. The decline in ARPU is attributed to high volume intake with many customers on introductory discounts as well as a dilution of digital TV ARPU driven by increased sales efforts of broadband services bundled with lower tier TV packages. We continue to see growth in broadband ARPU on the back of price adjustments and migration into higher speed tiers. Churn of 12.8 per cent was 0.4 percentage points higher than Q2 2017. Within B2B we saw a decline in revenue, down 15.1 per cent (SEK 12m) compared to Q3 2016, as we focus on the OnNet broadband business, which grew by 14.9 per cent compared to the third quarter last year. We continue efforts to improve the mix between high margin OnNet business and low margin OffNet business and expect continued pressure on revenue throughout 2017 while underlying EBITDA and operating free cash flow continue to improve.

Addressable households reach 2.7m
We made further progress in our network expansion programme with 100,000 addressable households added in the quarter to a total of 700,000 since the start of the expansion, 250,000 of which are unique to Boxer. Since the start of the footprint expansion the Group has increased its footprint by 35 per cent from 2m to 2.7m addressable households. We remain confident that we can reach our target of at least 3m households by 2020, which constitutes an increase of 50 per cent from before the SDU expansion and the Boxer acquisition.

Deployment of our own fibre in selected trial areas continued successfully during the quarter. Given the potential change in regulation, we need more time to further evaluate whether it is more beneficial to increase focus on our capex light approach of connecting to third party infrastructure, rather than scaling up new build beyond the trial areas. We are cautiously optimistic that potential changes in the regulatory environment next year could improve both the scope and the economics of the expansion as closed networks may become accessible and open networks which are only accessible through a communications operator today could become open for local access (unbundling). Since this could potentially give Com Hem access to all SDU households it would be a major tailwind to the scope and economics of the expansion.

Further improvement in the Boxer Segment
The positive momentum that we saw last quarter in Boxer continued with an additional 5,000 broadband RGUs added. Churn decreased by 0.6 percentage points to 14.4 per cent but as expected we still see a decline in unique customers and total RGUs, down by 9,000, and 6,000, respectively, in-line with the previous quarter. In the fourth quarter we expect a temporary increase in churn due to migration of the 700 Mhz band as well as seasonal effects of both competitor fibre rollout and expiration of binding periods across the customer base.

Boxer can now reach 1,000,000 addressable households including all of the Com Hem Segment’s current fibre footprint as well as 250,000 SDU households unique to Boxer. While we are able to grow Boxer’s profits even with declining revenue, we hope to be able to turn the company into RGU growth and stop the revenue decline in the coming years as the Boxer brand gets further traction as a broadband-led TV operator across the newly acquired SDU footprint. This would constitute a success beyond our initial expectations.

Significantly increased dividend in 2018
Due to increased confidence in our ability to continue generating strong cash flow, the Board intends to propose a change to the mix of the shareholder remuneration by increasing the cash dividend by 50 percent from SEK 4.00 per share to SEK 6.00 per share to be paid out semi-annually in March and September, 2018. Alongside the cash dividend we intend to continue to do buybacks of some SEK 40m-50m per month in 2018. The Com Hem Group remains committed to distribute all excess cash to its shareholders while maintaining leverage within the target interval of 3.5-4 net debt / underlying EBITDA LTM.

Looking ahead
Focus for the rest of 2017 will be to continue progress on the projects we have initiated over the last year. In the Com Hem Segment we will continue initiatives to improve customer satisfaction such as preparing for the rollout of DOCSIS 3.1, which will allow higher speeds and the launch of our new TV hub. In Boxer we will put all our efforts into increasing the broadband penetration in the new fibre footprint while executing on the integration process. We will continue expanding our footprint toward the 3m target which will provide the Com Hem Group with room to grow at this pace for many years to come and in addition we continue the work to attain an MVNO (mobile virtual network operator) agreement to prepare the business for a converged market.”

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