TSX gains on big banks strength
Investing.com -- Shares of Tele2 AB (ST:TEL2b) rose 2% Monday after UBS upgraded the Swedish telecom group from Sell to Buy, raising its price target to SEK186 from SEK102.
The brokerage cited stronger-than-expected cost savings, improving revenue trends in Sweden, and sector-leading growth projections.
UBS now expects Tele2’s EBITDAaL to grow 12.5% in 2025 and 8.6% in 2026, placing the company 5% ahead of Visible Alpha consensus by 2027.
Its three-year EBITDAaL CAGR of 8.4% is the highest among sector peers. Free cash flow is forecast to rise at a 19.7% CAGR over the same period, driven by efficiencies and capex normalization.
Tele2 delivered a 6.2% EBITDAaL beat in Q2 2025, prompting the company to raise its full-year guidance to "slightly above 10%."
UBS attributes the upside partly to ongoing cost initiatives, including the reduction of 600–700 full-time positions, roughly 15-17% of the workforce.
The brokerage estimates annualized savings from personnel cuts between SEK630 million and SEK750 million, with a majority of the departures in Sweden, where wages are higher.
Additionally, Tele2 has renegotiated 50% of 350 supplier contracts by mid-2025. UBS estimates these changes contributed SEK130 million to Q2 EBITDAaL and could yield peak quarterly savings of SEK260m from 2026.
Revenue growth, particularly in Tele2’s core Swedish market, is expected to strengthen.
End-user service revenue (EUSR) grew 0.4% in Q2 2025 but, after adjusting for one-time effects such as the Boxer TV shutdown and mobile contract changes, UBS estimates underlying growth at 2.5%. This figure is projected to double to 3% by 2026–2027.
Further EBITDAaL upside of 2-6% is forecast from a planned exit of third-party distribution channels, which UBS says could lower churn and customer acquisition costs.
A separate 1-2% margin boost could come from regulatory changes to wholesale broadband access pricing under review by Swedish regulators.
UBS also sees Tele2 as the second most exposed European operator to potential 4-to-3 market consolidation.
If realized, M&A could add SEK10-22 per share to valuation. Monetization of tower assets could yield SEK14-30 per share in special dividends on top of projected organic DPS doubling from SEK6.35 in 2025 to SEK13.00 in 2029.
Despite a rally this year, UBS notes Tele2 still trades at a around 25% discount to peer yields such as Elisa and Swisscom (SIX:SCMN).
The upgraded SEK186 price target reflects 65% estimate revisions and 35% valuation adjustments, including a reduced WACC and higher terminal growth rate.