Com Hem Q4 revenue up 1.4%

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Swedish multi-play operator Com Hem has reported its Q4 revenue increased by 1.4 per cent to SEK 1.805 billion (€183.3m) for the Group, with Com Hem Segment increasing by 4.2 per cent to SEK 1.389 billion.

Unique consumer subscribers rose by 12,000 to record high 983,000. Com Hem saw continued strong volume growth in broadband, up 14,000 to record high 750,000 RGU, and also continued growth in digital TV RGU’s, up 4,000 to 655,000, with a continued growth of 5,000 TiVo customers (penetration rate of 40 per cent).

Anders Nilsson, CEO, Com Hem Group commented: “In the Com Hem Segment we saw another quarter of multi-year record intake of unique customers, broadband RGUs and digital TV RGUs. Our customer base grew by 12,000 in the segment and the number of RGUs increased by 15,000 with very strong growth in both broadband and digital TV, up 14,000 and 4,000 RGUs, respectively. Our TiVo base grew by 5,000 customers, (now 40% 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 remained at SEK 373. Consumer churn of 13.6% was 0.8 percentage points higher than Q3 2017 mainly due to price adjustments in Q4 as well as a small portion related to the Discovery blackout. Within B2B we saw a decline in revenue, down 12.3% (SEK 10m) compared to Q4 2016, as we focus on the OnNet broadband business which grew by 17.4% compared to Q4 2016.

Addressable households reach initial target of 2.8m
We made further progress in our network expansion programme with 100,000 addressable households added in the quarter to a total of 800,000 since the start of the expansion, 200,000 of which are unique to Boxer. Since the start of the footprint expansion one and half year ago, the Group has increased its footprint by 40% from 2.0m to 2.8m addressable households. We remain confident that we can reach our target of at least 3.0m households by 2020, which constitutes an increase of 50% from before the SDU expansion and the Boxer acquisition. Deployment of our own fibre in selected trial areas continued during the quarter and will conclude in early 2018.
Given the success of our capex-light approach of connecting to third party infrastructure, we have no plans to scale up new build beyond the trial areas.

Executing on the turnaround of Boxer
We continue to see positive momentum in Boxer with an additional 5,000 broadband RGUs added in the quarter and ARPU reaching a record high of SEK 301 due to increased dual penetration. Consumer churn temporarily returned to peak levels in Q4 2017 (19.4%) mainly due to the migration of the 700 Mhz band and seasonality effects of expiration of binding periods across the customer base. Part of the increase was also due to a lag effect of the Discovery blackout in September. In spite of these temporary negative events, decline in unique customers and RGUs were in-line with previous quarters, down 12,000, and 8,000, respectively.

We now align Boxer with the Group’s more-for-more strategy; building customer satisfaction to increase volume growth and pricing power. In Q1 2018 we initiate price adjustments for a large part of the Boxer digital TV customer base and as a result we expect churn to remain elevated in Q1 2018. Boxer’s fibre footprint increased from 1,000,000 to 1,100,000 addressable households in Q4 including roughly 200,000 which do not overlap with the Com Hem Segment. After a full year with Boxer we remain hopeful that we can 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 expanding SDU footprint.

Entering the next chapter in the Com Hem story
During the last few years Com Hem has been transformed from a struggling TV-provider with a sub-par network and low customer satisfaction into a best in class fixed-line connectivity provider with the widest content portfolio delivered through user-friendly and modern platforms. Focus on customer satisfaction has resulted in high customer loyalty and increased pricing power. If approved by the shareholders, we will in 2018 enter the next phase in the Com Hem success story by merging with Tele2 to create a leading integrated operator in the Swedish market. Through the combination of these highly complementary businesses we will be able to enhance our eff ort to increase customer satisfaction by offering a full range of complementary connectivity and digital services. This will allow us to grow revenue further, as we capitalize on the increasing fixed and mobile data usage, underpinned by increased video consumption. The combined company can in addition be run more efficiently leading to an enhanced cash conversion than on a standalone basis.

Looking ahead
In 2018 we will focus on a number of initiatives that we believe will further increase customer satisfaction and financial growth across the Group. During Q1 we are executing the bulk of this year’s price adjustments, for the first time including Boxer. As part of our more-for-more strategy we have enhanced our services by, among other things, adding TV-channels and on demand content to our portfolio and upgraded the broadband speeds for part of our customer base in 2017. Given that price adjustments will affect a larger portion of the customer base than previous years, we expect the effect on Q1 churn to be higher as well. The rollout of DOCSIS 3.1 will allow higher speeds and increased capacity to future-proof our FibreCoax network. We will launch next generation TV service – the TV Hub and further develop our app-based video services which will help us execute the more-for-more strategy across both of our brands. In addition, we will continue expanding our addressable footprint toward the 3.0m target which will allow us to offer our services to an even larger number of consumers and secure growth for many years to come. Today we reiterate our guidance for 2018 and the mid-term as we aim to deliver mid-single digit underlying EBITDA growth for the entire Group annually. We expect growth to be skewed toward the Com Hem Segment in 2018 as we continue necessary eff orts to execute on the turnaround of Boxer. We expect cCapex for the entire Group to be in the range of SEK 1.0-1.1bln annually. We aim to maintain our leverage within the interval of 3.5-4.0x underlying EBITDA LTM.”


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