Tele2 Third quarter 2012

THIRD QUARTER 2012

Tele2 AB

October 18, 2012

2

Agenda

• About Q3 2012

• Financial review

• Concluding remarks

3

Tele2 Group Q3 Highlights

• Net mobile customer intake of 1.5 million leading to a total customer base of 37.7 million

• Net sales growth for the Group amounted to 9% excluding exchange rate differences, corresponding to SEK 10,906 million

• EBITDA amounted to SEK 3,002 million, equivalent to a margin of 28%

• CAPEX amounted to SEK 1,229 million

4

Focus Continue to grow customer base and maximize the 2G opportunity Evaluate possibilities to expand carefully through new licenses as well as by

complementary acquisitions Make progress on technology neutrality

Market Area Russia: Overview

Population Appr. 143 million

Tele2 Russia 43 regions of Russian Federation 22.3 million subscribers Mobile operator #4 in Russia in terms

of subscribers and revenue

Represents 30% of total net sales in Q3 2012

5

0%

5%

10%

15%

20%

0

1,000

2,000

3,000

4,000

Q3 11 Q4 11 Q1 12 Q2 12 Q3 1232%

34%

36%

38%

40%

42%

0

400

800

1,200

1,600

Q3 11 Q4 11 Q1 12 Q2 12 Q3 12

Q3 Highlights Russia

EBITDA and EBITDA MARGIN

NET SALES and YoY NET SALES GROWTH

CUSTOMER BASE and CUSTOMER INTAKE

SEK Million

YoY net sales growth (right)

Net sales (left) EBITDA margin (right)

EBITDA (left) Customer base (left) Customer net intake (right)

Thousands of customers SEK Million

• Strong customer net intake of 710,000• Increased EBITDA margin, amounting to 38%• ARPU continues to grow, showing a growth of

4% YoY

0

200

400

600

800

16,000

18,000

20,000

22,000

24,000

Q3 11 Q4 11 Q1 12 Q2 12 Q3 12

6

NET ADDITIONS

Thousands of subscribers

TELE2 SUBSCRIBERS AS PART OF TOTAL RUSSIAN MOBILE MARKET

The Russian mobile market overview

Million subscribers

ANNUALIZED CHURN RATE

Source: Company data, AC&M Consulting

ARPU DEVELOPMENT

RUB

Tele2

Tele2Vimpelcom

MegaFonMTS

Tele2Vimpelcom

MegaFonMTS

234

0

100

200

300

400

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

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50

100

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200

250

Q109

Q209

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

9.5%6.5% 7.7% 8.8%

4% growth

Tele2Vimpelcom

MegaFonMTS

-4 000

-2 000

0

2 000

4 000

6 000

8 000

Q309

Q409

Q110

Q210

Q310

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

0%

20%

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60%

80%

Q3-11 Q4-11 Q1-12 Q2-12 Q3-12

7

92% 92% 91% 92% 92%

8% 8% 9% 8% 8%

0

1,000

2,000

3,000

4,000

Q3 11 Q4 11 Q1 12 Q2 12 Q3 12

Q3 Revenue Source Development

Voice and data demonstrate 8% and 12% YoY growth respectively

VOICE & OTHER and DATA REVENUE SPLIT DEVELOPMENT

Data accessVoice & other

SEK millions

8

Regulatory update: significant developments

Technology neutralityOn October 2, GKRCh* requested the Telecom Ministry to analyze the studies about using 900 MHz band for UMTS and 1800 MHz for LTE by December 1. Tele2 will further contribute to the discussion on LTE1800. The next GKRCh meeting is tentatively scheduled for December 7, 2012

* GKRCh – State Commission on Radio Frequencies

New regional licensesOn October 2, the GKRCh meeting agenda included the discussion of 9 GSM1800 license distributions. According to the statements of Ministry officials, the current plan is to distribute them via auctions although the auctions timing and the conditions have not yet been announced. Tele2’s participation in the auctions will depend on their terms and conditions.

9

Tele2 Russia forward looking statement

The following assumptions should be taken into account when estimating the operational performance of the total operations in Russia in 2012:

• Tele2 expects the subscriber base to reach approximately 22.5 (earlier 22) million.

• Tele2 expects ARPU to grow by 3-5 percent in local currency.

• Tele2 expects an EBITDA margin of between 37-39 percent.

• Tele2 expects capex of between SEK 1,300 - 1,500 million.

10

Market Area Nordic: Overview

Population 14.4 million

Tele2 Sweden and Tele2 Norway Home market and test bed for new services

Represents 40% of total net sales in Q3 2012Sweden 29%; Norway 11%

Focus Sweden: Build on mobile growth and 4G roll-out coupled with household / corporate

fiber strategy Norway: Roll out own network and focus on bucket-price subscriptions

11

Q3 Highlights Tele2 Sweden

• Net sales amounted to SEK 3,189 million and EBITDA amounted to SEK 966 million

• Mobile service revenue growth of 4% YoY excluding interconnect, and 2% including interconnect

• Mobile EBITDA margin of 33%, affected by the introduction of iPhone 5

Mobile Fixed telephonyFixed broadband OtherCustomer base (left) Customer net intake (right)

EBITDA margin (right)


SEK MillionSEK MillionThousands of customers




-4%

-2%

0%

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0

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2,000

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Q3 11 Q4 11 Q1 12 Q2 12 Q3 120%

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250

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Q3 11 Q4 11 Q1 12 Q2 12 Q3 12-80

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40

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4,700

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4,900

Q3 11 Q4 11 Q1 12 Q2 12 Q3 12

12

Bucket price plans

Launch of new Comviq price plan

Continued demand for fixed fee price plans

13

2G and 4G network roll-out

2G

4G 80% population coverage

Shared network activated on Gotland and on the West Coast of Sweden

14

Smartphone market development

Sales of top ten mobile phones Tele2 Sweden (Q32012)

1. iPhone 4S2. Samsung Galaxy SIII3. iPhone 54. iPhone 45. Samsung Galaxy Ace6. Samsung Galaxy SII7. HTC Desire C8. Samsung Galaxy Gio9. Sony Xperia Acro S10.Samsung E1080

Regular handset Smartphone

* Postpaid residential, quantity of handsets

SMARTPHONE INSTALLED BASE*

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1111 1112 1201 1202 1203 1204 1205 1206 1207 1208 1209

15

Tele2 Sweden forward looking statement

The following assumptions should be taken into account when estimating the operational performance of the Swedish mobile operations in 2012:

• Tele2 expects mobile service revenue to grow by approximately 3-4 percent.

• Tele2 expects an EBITDA margin of between 30-32 percent, assuming that the market environment will remain stable.

16

Q3 Highlights Tele2 Norway

• Strong focus on network roll-out• Satisfactory net intake of 14,000 mobile customers• Tele2 Norway reported total external revenue of SEK 1,184

million, of which SEK 1,117 million was mobile revenue• Mobile EBITDA contribution was SEK 101 million








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Q3 11 Q4 11 Q1 12 Q2 12 Q3 12-10%

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17

Tele2 Norway forward looking statement

The following assumptions should be taken into account when estimating the operational performance of the total operations in Norway in 2012:

• Tele2 expects a total revenue of between SEK 4,800-5,000 million.

• Tele2 expects an EBITDA margin of between 4-6 (earlier 2-3) percent.

• Tele2 expects capex of between SEK 450-550 (earlier 850-950) million.

18

Market Area Western Europe: Overview

Focus Netherlands Growth in mobile and B2B Austria B2B & continuous integration of Silver Server Germany Grow Fixed Via Mobile product

Population108 million

Leading the group in business to business services and consumer fixed broadband


Netherlands 11%; Germany 2%; Austria 3%

19

Q3 Highlights Tele2 Netherlands


• Financial performance continues to be stable • Mobile intake above plan – net intake of 51,000

customers in Q3 and 96,000 YTD, with a significant part in the high value mobile postpaid segment

• Several successful large corporate contracts signed push intake in B2B







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Q3 Highlights Tele2 Germany and Tele2 Austria

TELE2 GERMANYEBITDA and EBITDA MARGIN

TELE2 AUSTRIAEBITDA and EBITDA MARGIN


EBITDA (left) EBITDA margin (right)

EBITDA (left)

SEK Million SEK Million

• Austria and Germany continue to show stable profitability

• Tele2 Germany: Fixed via Mobile partly compensates the decline in fixed

• Tele2 Austria: B2B data intake remains steady throughout the quarter, delivering stable financial performance

• Successful integration of Silver Server almost finalized

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21

Focus Continued rapid market share growth in Kazakhstan Efficiency improvements in Baltics Improvements in market share growth in Croatia

Market Area Central Europe and Eurasia: Overview

Population28 million


Estonia 2%; Latvia 2%; Lithuania 3%; Croatia 3%; Kazakhstan 3%

22

• Stable financial performance and profitability in a competitive market

• Tele2 Estonia maintains a positive net intake of mobile customers

• Modernization of network and 4G roll-out currently ongoing

Q3 Highlights Tele2 Estonia

MOBILE CUSTOMER BASE and CUSTOMER INTAKEThousands of customers

Mobile customer base (left) Customer net intake (right)

SEK Million



Net sales (left)



EBITDA (left)

SEK Million

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Q3 11 Q4 11 Q1 12 Q2 12 Q3 120%

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Q3 Highlights Tele2 Latvia

• Tele2 Latvia maintains high efficiency in a competitive market• EBITDA margin amounted to 34%• Net customer intake of 21,000• Rolling out 4G when commercially attractive

CUSTOMER BASE and CUSTOMER INTAKEThousands of customers

Customer base (left) Customer net intake (right)

SEK Million



Net sales (left)

EBITDA and EBITDA MARGINSEK Million


EBITDA (left)

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24

Q3 Highlights Tele2 Lithuania

• Significant intake of 38,000 mobile customers• EBITDA margin amounted to 35%• Continuing strong performance

MOBILE CUSTOMER BASE and CUSTOMER INTAKEThousands of customers

Mobile customer base (left) Customer net intake (right)

SEK Million



Net sales (left)



EBITDA (left)

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MARKET SHARE DEVELOPMENT (revenue; 100% of the market)

MARKET SHARE DEVELOPMENT (EBITDA; 100% of the market)

Tele2 Lithuania continues to outperform its competitors in terms of Revenue market share growth and EBITDA market share. Tele2 has the highest

service revenue among all competitors

Tele2 Lithuania – a success story

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Tele2 Company A Company B

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Tele2 Company A Company B

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Q3 Highlights Tele2 Croatia

• Positive net intake of 33,000 customers• Focus on maintaining a positive cash flow• An impairment of goodwill and other fixed assets amounting to

SEK 250 million was done in the quarter

CAPEX

EBITDA-CAPEX

SEK Million


Thousands of customers


SEK Million



Net sales (left)


SEK Million


EBITDA (left) EBITDA

EBITDA-CAPEX

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27

Tele2 Croatia forward lookingstatement

The following assumption should be taken into account when estimating the operational performance of the Croatian mobile operations in 2012:

• Tele2 expects Croatia to reach an EBITDA margin of between 4-6 percent.

28

Q3 Highlights Tele2 Kazakhstan

• Continuing strong net intake of 589,000 customers • Total number of customers amounted to 3.1 million• Continuing rapid roll-out of new base stations for increased

coverage

CUSTOMER BASE and CUSTOMER INTAKEThousands of customers


SEK Million



Net sales (left)



EBITDA (left)

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The Kazakhstan mobile market overview

MOBILE SUBSCRIBERS – MARKET SHARE NET ADDITIONSThousands of subscribers

10.5%

Dalacom/PathwordTele2 Kcell/Activ

Beeline Dalacom/PathwordTele2 Kcell/Activ

Beeline

3.5%

Tele2 Kazakhstan has reached more than 3 million customers within 18 months of operations

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Tele2 Kazakhstan forward-looking statement

The following assumptions should be taken into account when estimating the operational performance of the total operations in Kazakhstan in 2012:

• Tele2 expects the subscriber base to reach approximately 3.4 (earlier 3.0) million.

• Tele2 expects an EBITDA contribution of between SEK -350 to -400 million

• Tele2 expects capex of between SEK 450-500 (earlier 550-600) million.

• Tele2 expects to reach EBITDA break-even by 2H 2013.

• Tele2 expects to reach a long-term mobile customer market share of 30 percent.

31

Agenda

• About Q3 2012



32

SEK million Q3 2012 Q3 2011 ∆%

Net sales 10,906 10,429 4.6%

EBITDA 3,002 2,986 0.5%

EBITDA margin (%) 27.5% 28.6% -1.1%

Depreciation & associated companies -1,147 -989 16.0%

Depreciation of net sales (%) -10.5% -9.5% -1.0%

One-off items -538 -20

EBIT 1,317 1,977 -33.4%

Normalized EBIT 1,855 1,997 -7.1%

Normalized EBIT margin (%) 17.0% 19.1% -2.1%

Financial items -219 -287

Taxes -118 -431

Net profit from continuing operations 980 1,259 -22.2%

Discountinued operations - 1

Net profit 980 1,260 -22.2%

Group results Q3

• During the quarter one-off items of SEK -538 million affected the EBIT result

• One-off tax items amounted to SEK +262 million

33

SEK million YTD 2012 YTD 2011 FY 2011 ∆%

Net sales 32,451 30,149 41,001 7.6%

EBITDA 8,288 8,339 11,212 -0.6%

EBITDA margin (%) 25.5% 27.7% 27.3% -2.1%

Depreciation & associated companies -3,604 -2,974 -4,158 21.2%

Depreciation of net sales (%) -11.1% -9.9% -10.1% -1.2%

One-off items -555 22 -4

EBIT 4,129 5,387 7,050 -23.4%

Normalized EBIT 4,684 5,365 7,054 -12.7%

Normalized EBIT margin (%) 14.4% 17.8% 17.2% -3.4%

Financial items -718 -591 -674

Taxes -712 -1,203 -1,472

Net profit from continuing operations 2,699 3,593 4,904 -24.9%

Discountinued operations - -7 -7

Net profit 2,699 3,586 4,897 -24.7%

Group results YTD

34

-6%

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-2%

-1%

0%

1%

EUR RUB NOK

Average YTD Sept 2012 vs. YTD Sept 2011 Fixing rate Sept 2012 vs. Dec 2011

Currency movements YTD

EUR/EUR pegged and RUB currencies represent 57 % of external sales and 73 % of EBITDA

35

8.0%

8.5%

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Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12

Depreciation Depreciation of net sales (%)

Depreciation

Depreciation and Depreciation as a percentage of net sales

Change year-on-year for Q3

• Acquisition of Network Norway: SEK 80 million

• Upgrade/replacement of networks in the Baltics:SEK 65 million

• Reduction in Sweden:SEK -55 million

• Growth Russia and Kazakhstan: SEK 61 million

SEK million

36

Financial items in cash flow statement Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011

Interest paid -154 -76 -388 -150 -366

Financial items in income statement Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011

Interest income/costs -259 -180 -710 -308 -483

Exchange rate differences, external -12 -11 -19 -53 -24

Exchange rate differences, intragroup 88 -53 135 -92 13

Other financial items -36 -43 -124 -138 -180

Total -219 -287 -718 -591 -674

Financial items

37

Taxes in income statement Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011

Normal -380 -431 -974 -1,203 -1,580

One-off 262 - 262 - 108

Total -118 -431 -712 -1,203 -1,472

Taxes in cash flow statement Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011

Normal -178 -235 -492 -785 -948

One-off - - - - -

Total -178 -235 -492 -785 -948

Taxes

• One time valuation of deferred tax assets in Austria SEK +262 million

• Deferred tax assets at year to date amounted to SEK 2.5 billion (Dec 2011: SEK 3 billion)

38

SEK million Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011

OPERATING ACTIVITIES

Cash flow from operations, excl. taxes and interest 2,866 2,978 8,165 8,402 11,261

Interest paid -154 -76 -388 -150 -366

Taxes paid -178 -235 -492 -785 -948

Change in working capital 244 59 -421 -205 -257

Cash flow from operating activities 2,778 2,726 6,864 7,262 9,690

INVESTING ACTIVITIES

CAPEX -1,076 -1,142 -3,323 -3,819 -5,572

Cash flow after CAPEX 1,702 1,584 3,541 3,443 4,118

Shares and other financial assets 3 51 -200 -3 -1,563

Cash flow after investing activities 1,705 1,635 3,341 3,440 2,555

Cash flow

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-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0

Q4 '11 Q1 '12 Q2 '12 Q3 '12

Revolving Credit Facility Russian bond Commercial paper

Swedish bond Norwegian bond Other financing

Put option Kazakhstan Cash Pro forma net debt

Pro forma financial debt profileSources of fundingSEK billion

12.812.1

16.9

15.2

40

12.812.1

16.915.2

2.92.9

2.9 2.9

0.00

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Q4 '11 Q1 '12 Q2 '12 Q3 '12

Pro forma net debt Ordinary dividend (paid May 2012)

Extraordinary dividend (paid May 2012) Leverage net

Debt position and ratioPro forma net debt / EBITDA 12 m rollingSEK billion / Ratio

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0%

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Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12

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16% 16%

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Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12

Group financialsGroup EBITDA and Group EBITDA margin

Group CAPEX (BS) and CAPEX/Sales ROCE (Normalized)

Group Net SalesSEK million SEK million

SEK million Percent

Group EBITDA margin

CAPEX/Sales

► Mobile► Fixed telephony

► Fixed broadband► Other operations

42

Agenda

• About Q3 2012



43

Concluding remarks

Continue to grow as an operator

Manage the shift from voice to data

Continue to migrate from prepaid to postpaid

Exploit new services and opportunities by offering our customers what they need for less

44

Q&A

Tele2 Third quarter 2012

Documents

Transcript of Tele2 Third quarter 2012