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Kepler Cheuvreux Upgrades Tele2 to 'Buy' on Strong Cash Flow and Consolidation Potential
Summary
Financial services firm Kepler Cheuvreux has raised its rating for Swedish telecom operator Tele2 to 'buy' from 'hold,' citing a recent share price decline as an attractive entry point. The firm highlighted the company's strong cash generation and potential benefits from consolidation in the Swedish telecom market.
Kepler Cheuvreux has upgraded its recommendation for Tele2 to “buy” from “hold,” following a 13% drop in the Swedish telecom company's share price since mid-June. The brokerage maintained its price target of SEK 195, suggesting the recent decline presents an attractive entry point for investors.
The upgrade is based on Tele2's position as a "defensive, cash-generative operator with an appealing financial profile." Kepler Cheuvreux noted that the company is poised to convert low-single-digit service revenue growth into mid-single-digit growth in earnings before interest, taxes, depreciation, and amortization after leases (EBITDAaL). The firm also identified potential upside from consolidation within the Swedish telecom sector, where it views Tele2 as the clearest beneficiary.
Several potential catalysts could drive value for the company, according to the brokerage. These include industry consolidation, an increased stake or a full bid by investor Freya, or strategic mergers and acquisitions in the fixed-line market. In the absence of M&A activity, Kepler Cheuvreux suggested that Tele2 could return excess capital to shareholders through extraordinary dividends, potentially amounting to SEK 5-10 per share annually.
AdDespite the positive outlook, the firm also outlined key risks, including a potential de-rating of defensive stocks, value-destructive acquisitions, a slowdown in consolidation momentum, or weaker-than-expected growth. The report also noted the recent leadership change, with Nicholas Högberg taking over as CEO on July 1, but stated that his prior experience with the company should limit transition risk.
For the second quarter, Kepler Cheuvreux forecasts end-user service revenue growth of 3.2% in local currency, consistent with the first quarter. For the full year 2026, the brokerage projects 3% growth in end-user service revenue and 7% growth in EBITDAaL, with free cash flow expected to increase by 6%.