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Investing.com -- Tele2 (ST:TEL2b) has been upgraded to an “overweight” rating by J.P. Morgan, reflecting confidence in the company’s ability to grow ahead of its Nordic peers, in a note dated Friday.
Shares of the mobile network provider company were up 2.3% at 05:40 ET (09:40 GMT).
The brokerage’s latest analysis underscores a strong runway for multi-year price increases, coupled with cost savings from its Deep Transformation Plan.
The new price target for December 2026 has been raised to SEK 156 from SEK 114, representing a potential upside of approximately 21% from current levels.
J.P. Morgan says that “Tele2 has significant runway for multi-year price rises which could drive consensus service revenue estimates higher in the medium term.”
Competitor pricing trends indicate room for service price increases across mobile, broadband, and convergent offers.
Over the past six months, 85% of price changes in the Swedish telecom market have been upward, creating a favorable environment for continued revenue growth.
Tele2 is expected to deliver EBITDAaL growth exceeding 7% annually through 2025 and 2026.
While revenue estimates remain broadly unchanged, EBITDAaL has been revised upwards to reflect cost-saving initiatives.
“Both revenue and cost elements imply over 7% EBITDAaL growth over 2025 and 2026,” J.P. Morgan said.
The Deep Transformation Plan is expected to generate SEK 500 million in cost savings through workforce reductions, with the full impact reflected in the 2026 financials.
Shareholder returns are set to rise in line with free cash flow. “Should the company increase leverage to 2.5x and pay out extraordinary dividends, this could imply total declared dividend per share for 2025/26 of SEK 10.2 / 14.0, representing total dividend yield of 8.3% / 12.5%,” the analysts note.
With an anticipated dividend increase from SEK 6.9 per share in 2025 to SEK 9.0 per share in 2026, shareholders stand to benefit from Tele2’s improving cash flow generation.
Tele2’s competitive positioning is another area of strength. As J.P. Morgan points out, “Whilst Tele2 may not be directly involved in the consolidation, we think they are uniquely placed to benefit given Sweden accounts for ~80% of their EV.”
A potential merger between Telenor and Three Sweden could lead to a more rational pricing environment, indirectly benefiting Tele2.
From a valuation standpoint, Tele2 trades at a premium compared to Nordic telecom peers but at a discount relative to the broader European sector.
With a projected three-year EBITDA CAGR of 5.8%, Tele2 is expected to outpace Nordic competitors and the broader telecom industry, where average growth stands at 3.2% and 2.2%, respectively.