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All three major telecoms firms in Estonia enjoyed healthy profits in 2023

Tele2 balloons.
Tele2 balloons. Source: Postimees/Scanpix

Two of the three three major telecommunications firms in Estonia enjoyed Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margins of over 30 percent in 2023.

The EBITDA margin is a measure of a company's operating profit as a percentage of its revenue, calculated by dividing EBITDA by total revenue.

EBITDA itself is an alternate measure of profitability to net income (roughly speaking, revenue minus costs). By including depreciation and amortization as well as taxes and debt payment costs, EBITDA is a means of showing cash profit generated by a company's operations.

Telia and Elisa last week announced their results on this metric, at 39 percent and 30 percent respectively, while now Tele2 has reported a 30 percent EBITDA margin for 2023 also.

Margus Nõlvak, CEO of Tele2, said that competition in the mobile communications market in Estonia is healthy, though conceded that when looking at the general regional picture, the prices of fixed connections are still highest here in Estonia.

"The major difference seen in the past year was certainly the high inflation: Energy prices continued to rise, while thanks to the use of 5G, electricity consumption also rose," Nõlvak said.

Nõlvak said that the company provides a two-year price guarantee which he said may lead to more modest profit growth, but helps to foster and grow the customer base.

A map which recently circulated on social media should that Estonia also has average internet speeds well below those seen in many neighboring states.

Nõlvak said that this data does not tally with the results of other international speed tests.

The most commonly downloaded service is provided by Speedtest by Ookla, he said, citing its December results, which placed Estonia, with an average speed of 84 megabits per second (Mbps) in 27th place among 146 countries.

Lithuania was one place below, in 28th, Latvia in 33rd place, and Germany and the U.K. in 45th and 49th place respectively he added.

"We are [also] in 68th place in the world in terms of broadband speed, out of 178 countries, which is also a strong result, the Tele2 CEO said.

"Our position is not affected so much by the quality of our networks, but by the fact that packages with faster internet are more expensive," he added.

Tele2 published its last year's financial results on Tuesday, revealing that in 2023 it had 473,161 customers, took in revenue from end-user services of €61.71 million, and am EBITDA of €26.25 million.

Tele2's growth in 2023 was just one percent, however, he said, compared with a rise in operating profit of 6 percent in 2021, to €24 million.

A year later the company's operating profit stood at €25 million, said.

As noted Tele2's EBITDA margin stood at 30 percent.

Nõlvak said profitability is extremely important at the present time, in order to continue to make investments.

In 2023, the ratio of Tele2's investments to revenue was high, at 17 percent, he said. Prior to the development of the 5G network – whose bandwidths were awarded in summer 2022 via an auction process – the figure had been between 8 percent and 12 percent.

All market players must invest in the development and operation of the network, regardless of the size of their market share, Nõlvak added.

In 2022, then head of Tele2 Chris Robbins, a Canadian national, called internet services in Estonia unreasonably expensive, mainly the result of the dominance of Telia, which effectively owns the bulk of the physical infrastructure.

"The price of internet services in Estonia is insanely high. It is the worst service in the region, yet with the highest prices," Robbins said, in fairly damning terms, in early March 2023.

"Lower high-speed internet wholesale prices would allow us to offer stronger competition in this regard as well," Nõlvak said, referencing the words of his predecessor.

The company says it wants to grow its customer base this year and is paying attention to consumer price sensitivity as a result.

Telia reported revenues in 2023 of €361 million and €63 million in profits.

Elisa's revenue stood at €226 million though the company says it will not announce its profit numbers until summer time.

These are the three major market players in Estonia, who between them won one each of the three 5G licenses up for auction. A fourth bidder, Lithuanian firm UAB Bite, failed to win a tender.

Iceland, with a population around a third that of Estonia, has five major internet and telecommunications services providers.

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Editor: Andrew Whyte

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