Slide 1: Third Quarter 2013
THIRD QUARTER 2013 Tele2 AB October 22, 2013
Slide 2: Agenda
Agenda About Q3 2013 Financial review Concluding remarks 2
Slide 3: Tele2 Group highlights Q3
Tele2 Group highlights Q3 Customer intake Net sales Net mobile customer intake Total net sales amounted to of 263,000 leading to a total SEK 7.5 billion and mobile customers base of 15.3 net sales grew by 3% YoY to million SEK 5.5 billion EBITDA CAPEX EBITDA amounted to SEK Further investment to 1.5
Slide 4: Reasons for a new outlook
Reasons for a new outlook 1 2 3 Shift from “pay as you Shift from voice to data Faster deterioration of go” to bucket pricing quicker than anticipated fixed line services more rapid than expected Resulting in change of long-term guidance 4
Slide 5: New guidance on Group level
New guidance on Group level 2015 Previous Net sales [SEK billion] 32.5-33.5 At least 35.6 EBITDA [SEK billion] 6.7-7.3 At least 8.3 Dividend indication to pay at least SEK 4.40 for 2013 Shareholder remuneration and balance sheet policies unchanged 5
Slide 6: Strategy unchanged
Strategy unchanged Owning customer Scale and efficiency relationship is Access is our core are key to our crucial to securing business profitability our position in the value chain We are not here to flip-flop 6
Slide 7: Sweden
Sweden Focus Build on increasing mobile demand from consumers and businesses Continue with mobile network build-out supported by household / corporate fiber strategy Ensure market share growth predominantly in the business segment Population Continue to build on shift from “pay as 9.6 millio
Slide 8: Q3 financial highlights Tele2 Sweden
Q3 financial highlights Tele2 Sweden Mobile customer net intake was 60,000 customers, of which 41,000 postpaid customers Net sales amounted to SEK 3,078 million and EBITDA amounted to SEK 900 million Underlying mobile service net sales (excl. interconnect and hardware sales) increased by 1%
Slide 9: Q3 operational highlights Tele2 Sweden
Q3 operational highlights Tele2 Sweden Comviq Tele2 – Residential Network Operations Successful national Tele2 stores roll-out – Data usage more than launch of ToGo total of 54 stores in Q3 doubles when customers Strong brand positioning Shift from “pay as you go” move from 3G to 4G New
Slide 10: Comviq is gaining market traction
Comviq is gaining market traction Gained No 1 Price Position Online Sales is performing Fastpris product successful, now 31% of Comviq is soon delivering growth by itself portfolio 10
Slide 11: Customer experience improvements
Customer experience improvements Application for iPhone and Android launched in the beginning of October Improved customer experience - Usage dashboard - Data Upsales - Prepaid Refill - Invoice information 11
Slide 12: Sales channel expansion
Sales channel expansion Successful national launch of Comviq To Go - over 100 stores Tele2 Store # 54 opened in 50 cities nation-wide Q1 13 Q2 13 Q3 13 Q1 13 Q2 13 Q3 13 30 108 108 46 51 54 stores stores stores stores stores stores Sales 12
Slide 13: Smartphone market development
Smartphone market development SALES OF TOP TEN MOBILE PHONES SMARTPHONE INSTALLED BASE TELE2 SWEDEN (Q3 2013) 100% 90% 4G 80% 70% 4G 60% 50% 40% 30% 20% 10% 0% 4G 4G Smart Feature 4G 4G 4G SHARE OF HANDSETS BEING 4G ENABLED TELE2 SWEDEN (Q3 2013) 81% including iPhone5 4G enabled Not 4G enabled 55% e
Slide 14: Continued growth in bucket price segment
Continued growth in bucket price segment SHARE OF CUSTOMER STOCK ON BUCKET SHARE OF ”BLOCKED” CUSTOMERS WHO PRICE PLANS HAVE PURCHASED EXTRA DATA 1,300 60% Thousands 1,200 50% 1,100 40% 1,000 900 30% 800 20% 700 10% 600 500 0% 58% purchased extra data Customer stock Percentage customers bucket price
Slide 15: Mobile data
Mobile data INCREASE IN 4G USAGE CONTINUING MB Data usage more than doubles when a customer shifts from 3G to 4G Continued roll-out of 800/1800 MHz Strengthen our 3G network to further enhance customer experience Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 3G 4G 2G 15
Slide 16: Continue to gain market shares in B2B
Continue to gain market shares in B2B Continued good performance of mobile soft switch “Tele2 Växel” Increased interest from the Large Enterprise segment Renewed frame agreement secured with “Kammarkollegiet” for Communication-as-a-service and operator products Roaming packages still perform
Slide 17: Customer satisfaction
Customer satisfaction END-USER SATISFACTION 100% Comments Positive end-user satisfaction trend for all 90% business areas: Tele2 Residential, Tele2 Business and Comviq 80% Strengthened capabilities within Work Force Management 70% Significantly improved system for quality management (training,
Slide 18: Tele2 Sweden forward looking statement
Tele2 Sweden forward looking statement The following assumptions should be taken into account when estimating the operational performance of the Swedish mobile operations in 2013: Tele2 expects total revenue of between SEK 10,100 to 10,300 million Tele2 expects EBITDA of between SEK 2,900 to 3,1
Slide 19: Norway
Norway Focus Roll-out of the country’s 3rd mobile network including LTE/4G Maintain world-class customer service From “pay as you go” to bucket-price subscriptions Population 5 million Tele2 Norway Mobile operator #3 in Norway in terms of subscribers and revenue Represents 14% of total Group n
Slide 20: Q3 financial highlights Tele2 Norway
Q3 financial highlights Tele2 Norway Customer net intake was 2,000 customers Tele2 Norway reported total net sales of SEK 1,029 million, of which SEK 974 million was mobile sales Underlying mobile service revenue (excl. interconnect and hardware sales) increased by 2% Tele2 Norway reached an
Slide 21: Q2 operational highlights Tele2 Norway
Q2 operational highlights Tele2 Norway Customer Trends Network Operations Customer Operations Bucket pricing facilitates Push 4G roll-out with World-class customer increase in data usage focus on city and urban service Increased smartphone areas Customer satisfaction penetration Traffic
Slide 22: Customer trends
Customer trends MIGRATION FROM ”PAY AS YOU GO” TO FIXED PRICE SUBSCRIPTIONS* High smartphone penetration 600,000 80% 71% 73% 75% No. of customers Increased penetration of 3G 900 phones 500,000 64% 68% 9/10 of all new handsets sold are smartphones 61% 60% 400,000 53% 300,000 40% 200,000 20% 100,0
Slide 23: Network operations
Network operations SITES READY 2,000 Network roll-out progressing according to 1,600 plan 1,200 Major contract for coverage in Oslo 800 Subway and Oslo Airport (OSL) signed 400 4G/LTE upgrade on-going, focus on 0 largest cities Jul-11 Jul-12 Jul-13 Jan-11 Jan-12 Jan-13 Apr-11 Apr-12 Apr-13 Oct
Slide 24: World-class customer service
World-class customer service END-USER SATISFACTION Comments 100% Solid CuVo performance matching Q2 90% level of 84% (almost world-class level at 85%), despite very challenging vacation 80% period Improved planning and support 70% processes across customer service and commercial brands 60% Upg
Slide 25: Tele2 Norway forward looking statement
Tele2 Norway forward looking statement The following assumptions should be taken into account when estimating the operational performance of the Norwegian mobile operations in 2013: Tele2 expects total revenue of between SEK 3,900 to 4,000 million (earlier 4,200 to 4,300) Tele2 expects EBITDA of
Slide 26: Netherlands
Netherlands Focus Continue to push 4G network roll-out Grow mobile operations Increase footprint of high bandwidth products Population 16.8 million Tele2 Netherlands Leading the Group in B2B and making transition to full MNO Represents 18% of total Group net sales in Q3 2013
Slide 27: Q3 financial highlights Tele2 Netherlands
Q3 financial highlights Tele2 Netherlands Mobile net adds of 56,000 customers, resulting in a total net intake of 38,000 customers Net sales amounted to SEK 1,383 million of which SEK 463 million was mobile sales Underlying mobile service revenue (excl. interconnect and hardware sales) increas
Slide 28: Q3 operational highlights Tele2 Netherlands
Q3 operational highlights Tele2 Netherlands Tele2 – Business Tele2 – Residential Network operations Large Enterprise Fixed broadband Site sharing contracts signed under pressure due to agreement with TMNL Mobile portfolio under competitive All fundamentals in development environment place
Slide 29: Increase new business in B2B segment
Increase new business in B2B segment Won several new Large deals in the corporate Enterprises market Fixed Mobile Success of our Hosted Voice Convergence proposition lies in ease of use Developing next steps in cloud SME solutions extending our fixed and segment mobile future 29
Slide 30: Broadband under pressure
Broadband under pressure YoY BROADBAND CUSTOMER BASE Customer base declining due to pressure from both cable and incumbent: Aggressive promotions Larger high speed internet coverage Decrease in price levels Main challenge Improve coverage on high speed internet portfolio Increase high speed
Slide 31: MVNO still going strong
MVNO still going strong CUSTOMER NET ADDITIONS (x1000) GROWTH TELE2 BASE YoY 90 700 Thousands 600 40 500 -10 400 Q112 Q212 Q312 Q412 Q113 Q213 Q3 300 -60 200 -110 100 0 -160 Tele2 KPN Vodafone T-Mobile Tele2 is the only company that has shown continuous growth in the last 6 quarters 31
Slide 32: Principles of site sharing with T-Mobile NL
Principles of site sharing with T-Mobile NL Antenna 2G T- 3G X T-Mobile core Mobile 4G network 4G X base station X Tele2 Backhaul base Tele2 core station network RRH* Passive sharing of infrastructure and antennas Sharing of backhaul, power and field services is optional Majority of sites will
Slide 33: Network procurement done
Network procurement done Selected as a result of commercial RAN offer and competitive capabilities First RAN installed in Q4 2013 Selected due to experience and capabilities Core Equipment delivered and installation has started Selected due to references, flexibility IMS/Voice over and exp
Slide 34: Roll-out development
Roll-out development FIRST TELE2 4G SITE CONSTRUCTED ON ROLL-OUT AUGUST 20 IN HEERHUGOWAARD WEEKLY DEVELOPMENT End of Q3 32 33 34 35 36 37 38 39 40 Site leases Civil works started Approx. 3,500 sites for initial roll-out Priority to achieve full coverage Competitive capacity, speed and quality
Slide 35: Customer operations
Customer operations END-USER SATISFACTION Comments 100% Performance still lagging behind rest of 90% footprint Upgraded Customer Operation 80% management team onboard Specific improvements of processes 70% frustrating for customers (suspension, high usage etc.) 60% Pinpointed improvements of
Slide 36: Tele2 Netherlands forward looking statement
Tele2 Netherlands forward looking statement The following assumptions should be taken into account when estimating the operational performance of the Dutch mobile operations in 2013: Expected revenue of SEK 1,600 to 1,700 million Tele2 expects EBITDA of between SEK -50 to -75 million Tele2 exp
Slide 37: Central Europe and Eurasia
Central Europe and Eurasia Focus Market share growth in Kazakhstan Efficiency improvements in the Baltics Growth and profitability improvements in Croatia Ensure stable financial performance in Germany and Austria Growth in mobile services in Germany Population 118 million Represents 27% o
Slide 38: Q3 highlights Tele2 Germany and Tele2 Austria
Q3 highlights Tele2 Germany and Tele2 Austria Tele2 Germany: Continued growth of mobile customer base*, now reaching 156,000 customers after the launch of additional mobile services EBITDA margin of 8% (22% excluding launch of mobile as a service provider) Tele2 Austria: Stable EBITDA performa
Slide 39: Mobile services Germany
Mobile services Germany MOBILE CUSTOMER BASE AND CUSTOMER INTAKE Comments Mobile* 300 25 Multi-host business model with Vodafone and 250 20 Eplus as partners 200 Significant increase of brand awareness and 15 150 attractiveness after commercial launch 10 100 Strong focus on roll-out of sales c
Slide 40: Q3 financial highlights Tele2 Estonia, Latvia and Lithuania
Q3 financial highlights Tele2 Estonia, Tele2 Latvia and Tele2 Lithuania Tele2 Estonia: Tele2 Latvia: Tele2 Lithuania: Intensive price competition Strong net intake of 24,000 After achieving revenue continued resulting in low customers despite tough market share leadership in EBITDA margin of 2
Slide 41: Q3 highlights Tele2 Croatia
Q3 highlights Tele2 Croatia Positive net intake in postpaid and prepaid segments, total mobile net intake of 50,000 customers Net sales development of 4% Strong EBITDA of SEK 48 million and reaching 13% margin, however this is partly driven by positive impact from Visitor Roaming business CUST
Slide 42: Q3 financial highlights Tele2 Kazakhstan
Q3 financial highlights Tele2 Kazakhstan Net intake -14,000 customers due to changed commission structure from fixed dealer commission to revenue sharing schemes Mobile net sales grew by 32% and amounted to SEK 357 million Improved profitability and traffic balance contributed to an EBITDA mar
Slide 43: Q3 operational highlights Tele2 Kazakhstan
Q3 operational highlights Tele2 Kazakhstan Mobile Network operations Market/Commercial Expand network coverage Revenue market share at Focus on network cell 9% in Q2 2013 on track availability, optimization Expected 4th player and quality improvement ALTEL market entry in Q4 Building fiber
Slide 44: Commercial focus
Commercial focus PLP (PRICE LEADERSHIP PERCEPTION) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2013-02 2013-03 2013-04 2013-05 2013-06 2013-07 2013-08 2013-09 TELE2 Op. 1 Op. 2 Op. 3 Op. 4 Tele2 established a strong PLP position in the market during 2013 44
Slide 45: Commercial focus
Commercial focus Strong growth and demand for mobile data services All dealers moved to a revenue share commission scheme from August 15th to ensure higher quality of gross intake Monobrand stores: As of today we have opened a total of 53 (11 in Q3 2013) monobrand stores across all regions in
Slide 46: Network operations
Network operations POPULATION COVERAGE % 90% After a massive roll-out and 80% after achieving 84% population coverage in 2012, 70% our current focus is to go for coverage in smaller cities 60% and villages, roads and recreational areas. 50% 40% This roll-out type improves service quality, but ca
Slide 47: World-class customer service
World-class customer service END-USER SATISFACTION 100% Comments Stable CuVo performance at high levels, 90% despite growth Contact Center Platform upgraded to 80% improve agent level performance 70% Very positive result from Group operational/process review 60% 50% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Slide 48: Tele2 Kazakhstan forward-looking statement
Tele2 Kazakhstan forward-looking statement The following assumptions should be taken into account when estimating the operational performance of the Kazakh mobile operations in 2013: Tele2 expects total revenue of between SEK 1,350 to 1,450 million (earlier 1,450 to 1,550) Tele2 expects EBITDA o
Slide 49: Agenda
Agenda About Q3 2013 Financial review Concluding remarks 49
Slide 50: Group result Q3 2013
Group result Q3 2013 SEK million Q3 2013 Q3 2012 ▲% Net sales 7,529 7,649 -1.6% EBITDA 1,523 1,771 -14.0% EBITDA margin (%) 20.2% 23.2% -2.9% Depreciation & associated companies -848 -892 -4.9% Depreciation of net sales (%) -11.2% -11.6% 0.4% One-off items -450 -538 EBIT 225 341 -34.0% Normalized EB
Slide 51: Group result YTD
Group result YTD SEK million YTD 2013 YTD 2012 FY 2012 ▲% Net sales 22,303 22,869 30,742 -2.5% EBITDA 4,529 4,796 6,240 -5.6% EBITDA margin (%) 20.3% 21.0% 20.3% -0.7% Depreciation & associated companies -2,478 -2,842 -3,707 -12.8% Depreciation of net sales (%) -11.1% -12.4% -12.0% 1.4% One-off item
Slide 52: Currency movements YTD
Currency movements YTD 2% 1% 0% -1% -2% -3% -4% -5% -6% -7% -8% -9% EUR KZT NOK Average rate: vs comparable period last year Fixing rate: vs Dec 31, 2012 EUR/EUR pegged currencies represent 39% of external sales and 45% of EBITDA 52
Slide 53: Depreciation
Depreciation Depreciation and Depreciation as a percentage of net sales SEK million 1,200 14.0% 900 13.0% 600 12.0% 300 11.0% 0 10.0% Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Depreciation Depreciation of net sales (%) 53
Slide 54: Financial items
Financial items SEK million Financial items, expensed Q3 2013 Q3 2012 YTD 2013 YTD 2012 FY 2012 Interest income/costs -123 -130 -301 -374 -494 Exchange rate differences, external -6 -18 8 -25 -20 Exchange rate differences, intragroup -11 86 -36 158 116 Other financial items -45 -34 -123 -117 -155 To
Slide 55: Taxes
Taxes SEK million Taxes, expensed Q3 2013 Q3 2012 YTD 2013 YTD 2012 FY 2012 Normal -234 -224 -668 -543 -609 One-off - 262 - 262 163 Total -234 38 -668 -281 -446 Taxes, paid Q3 2013 Q3 2012 YTD 2013 YTD 2012 FY 2012 Excluding Russia Normal -31 -15 -193 -67 -110 One-off - - - - - -31 -15 -193 -67 -110
Slide 56: Cash flow
Cash flow SEK million Q3 2013 Q3 2012 YTD 2013 YTD 2012 FY 2012 OPERATING ACTIVITIES Cash flow from operations, excl. taxes and interest 1,501 2,879 5,730 8,199 10,794 Interest paid -99 -154 -323 -388 -668 Taxes paid -31 -178 -370 -492 -989 Change in working capital -14 231 -744 -455 -458 Cash flow
Slide 57: Cash flow excl. Russia
Cash flow excl. Russia SEK million Q3 2013 Q3 2012 YTD 2013 YTD 2012 FY 2012 OPERATING ACTIVITIES Cash flow from operations, excl. taxes and interest 1,501 1,645 4,545 4,696 6,065 Interest paid -99 -78 -254 -187 -292 Taxes paid -31 -15 -193 -67 -110 Change in working capital -14 219 -528 -485 -696 C
Slide 58: Pro forma financial debt profile
Pro forma financial debt profile Sources of funding SEK billion 20.0 17.5 14.9 15.2 15.8 15.0 12.5 10.0 8.1 7.6 7.5 5.0 2.5 0.0 -2.5 Sep'12 Dec'12 Mar'13 Jun'13 Sep'13 Revolving Credit Facility Russian bond Commercial paper Swedish bond Norwegian bond Other financing Put option Kazakhstan Cash Pro f
Slide 59: Debt maturity and currency profile
Debt maturity and currency profile Gross debt maturity profile Gross debt currency profile Gross debt SEK 8.7 billion (incl. unutilized: SEK 16.4 billion) Gross debt SEK 8.7 billion 12 0.1 1.6 10 8 3.4 6 4 3.5 2.0 2 3.2 1.0 1.2 0.9 0.4 0.1 0 2013 2014 2015 2016 2017 2018< SEK NOK EUR KZT USD Bonds C
Slide 60: Tele2 in Debt Capital Markets
Tele2 in Debt Capital Markets Instrument Date of issue Maturity date Volume in MSEK * NOK Bond Feb 20, 2012 Feb 24, 2017 MNOK 1,000 1,071 NOK Bond Feb 20, 2012 Feb 24, 2015 MNOK 300 322 SEK Bond May 8, 2012 May 17, 2017 MSEK 1,500 1,500 SEK Bond May 8, 2012 May 15, 2017 MSEK 800 800 SEK PP Bond Sep
Slide 61: Debt position and ratio
Debt position and ratio Pro forma net debt / EBITDA 12 m rolling SEK billion / Ratio 20.0 2.00 17.5 1.75 3.2 3.2 15.0 1.50 12.5 1.25 10.0 1.00 15.2 15.8 7.5 14.9 0.75 5.0 0.50 8.1 7.6 2.5 0.25 0.0 0.00 Sep 2012 Dec 2012 Mar 2013 Jun 2013 Sep 2013 Pro forma net debt Ordinary dividend, proposed/paid L
Slide 62: Group Financials
Group Financials ● ● Mobile Fixed telephony ● ● Fixed broadband Other EBITDA and EBITDA margin Net sales SEK million EBITDA margin SEK million 2,000 26% 10,000 24% 8,000 1,500 22% 6,000 1,000 20% 4,000 18% 500 2,000 16% 0 14% 0 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 CAPEX and CA
Slide 63: Customer net intake
Customer net intake in thousands Total net intake Net intake split 800 1,000 700 800 600 600 500 400 400 200 300 0 200 -200 100 0 -400 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 ● Total net intake ● Mobile ● Fixed broadband ● Fixed telephony In Q2 2013, the mobile customer stock w
Slide 64: Net sales development – Per service
Net sales development – Per service FX adjusted SEK million Mobile net sales Fixed broadband net sales 5,600 1,400 5,500 1,350 5,400 5,300 1,300 5,200 5,100 1,250 5,000 1,200 4,900 4,800 1,150 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Fixed telephony net sales Other operations net
Slide 65: Net sales development – Mobile
Net sales development – Mobile FX adjusted SEK million Q3 2013 year-on-year growth 6,000 5,458 5,489 5,304 5,374 5,086 5,000 854 1,078 866 Operator revenues -18% 1,042 857 857 4,000 838 Equipment revenues 27% 676 889 737 3,000 2,000 3,669 3,779 Underlying revenues 5% 3,586 3,491 3,492 1,000 0 Q3'12
Slide 66: Agenda
Agenda About Q3 2013 Financial review Concluding remarks 66
Slide 67: Concluding remarks
Concluding remarks Identified industry trends still valid Speed of change has increased Our strategic direction remains Updated guidance 67
Slide 68: Q&A
68 Q&A TELE2
Slide 69: Slide 69