A busy start for new CEO, but a lot remains
Eltel signs largest fibre agreement ever
Eltel today announced that it has signed a frame agreement with Valokuitunen, a joint venture between CapMan Infra and Telia, to build fibre to the home (FTTH) in Finland. The agreement is worth EUR ~200m over a three-year period and includes an option of one additional year. Eltel and Valokuitunen will work in close partnership, where Eltel will be responsible for project management, material management and logistics, fibre network construction, installation service works and documentation. Eltel's scope of work will also include maintenance and life-cycle services. Eltel and Valokuitunen have worked together since 2020, when Eltel was selected as Valokuitunen's construction partner. The new agreement more than doubles the company’s previous volumes and expands it geographically to cover all of Finland. The three-year frame agreement starts in Sept. ‘22 and runs until ‘25.
Adds 4% and 11% to our ‘23e sales and EBITA estimates If we assume the order value to be equally distributed between ’23-’25, the add to sales becomes EUR 67m annually. However, given that Eltel has worked with Valokuitunen since ’20, the incremental add to sales becomes EUR ~33m, or 4% on our ‘23e sales estimates. Finland is Eltel’s most profitable market, where we estimate a ‘22e-‘23e operating EBITA margin of 4.8% and 5.3%, compared to our ‘22e-‘23e estimates for the group of 0.9% and 1.7%. To our understanding, the expected profitability in the framework agreement is in line with segment Finland’s, thus ~5%. Based on this, the frame agreement adds 11% to our ‘23e EBITA estimates, all else equal, and increases the ’23e group EBITA margin from 1.7% to 1.8%.
A step in the right direction
We find today’s news as positive and a step in the right direction towards increased volumes and improved profitability, although a lot remains for Eltel to reach its 5% ...
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