Slide 1: Fourth Quarter 2010
FOURTH QUARTER 2010 Februaryy 8,, 2011
Slide 2: Agenda
Agenda g About Q4 2011 Financial review G id Guidance and dCConcluding l di remarks k 2 2010-10-20
Slide 3: Highlights Q4
Highlights g g Q4 • Group – Total customer base amounting to almost 31 million customers. Net customer intake for the group 803,000 – Net sales grew by 2 percent. Currency-adjusted net sales grew by 8 percent percent, driven by mobile sales – EBITDA grew by 10 percent. Currency-adjusted EBITDA grew
Slide 4: Highlights Tele2 Russia
Highlights g g Tele2 Russia • 755,000 (1,149,000) new customers in Q4 2010 • Revenue grew by 24 percentt in i Q4 2010 4 2010-10-20
Slide 5: Tele2 Russia: Mobile market overview
Tele2 Russia: Mobile market overview Penetration Prepaid share Mobile subscribers (million) P NET ADDITIONS QUARTERLY CHURN Share of adds (%) MTS Vimpelcom MegaFon Tele2 PERCENT Tele2 100% Net additions Quarterly churn 13% 80% 60% 10% 40% Q 7% 20% 0% 4% ‐20% 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Source: AC&
Slide 6: Tele2 Russia: Mobile market overview
Tele2 Russia: Mobile market overview MOBILE MARKET SHARES MOBILE MARKET SHARES PERCENT OF ACTIVE SUBSCRIBERS PERCENT OF RETAIL REVENUES 40% 35,0% market shares market shares 35% 30,0% 30% 25,0% , Mobile m Mobile m 25% Mobile TeleSystems 20,0% Mobile TeleSystems 20% VimpelCom VimpelCom 15,0% 15% Mega
Slide 7: Tele2 Russia: Mobile data market
Tele2 Russia: Mobile data market BIG4 DATA REVENUE BREAKDOWN* TELE2 REGIONS, PERCENT, 3Q10 14% 29% МТС МегаФон 22% ВымпелКом Tele2 35% BIG4 DATA TRAFFIC BREAKDOWN* DATA REVENUE TELE2 REGIONS, PERCENT, 3Q10 MTS Vimpelcom MegaFon Tele2 3% 9 МТС 8 МегаФон 7 7 18% 21% ВымпелКом Tele2 58% Data Rev, % of
Slide 8: Highlights Tele2 Sweden
Highlights g g Tele2 Sweden • Increased mobile revenue growth to 12 percent • Adding 20,000 (20,000) mobile customers, of which 65,000 (51,000) postpaid • Mobile EBITDA margin 30 (33) percent, percent due to a larger intake of smart phone customers and increased costs to JVs • 4G launch in five majo
Slide 9: Smart phones change the customers' behavior
Smart phones change the customers’ behavior • Switching to a smartphone changes the Top 10 phone sales (Oct-Dec) customer’s behavior – A customer used to a regular phone quickly 1 iPhone4 g of voice, text and data. increases its usage – ASPU increases with almost 20% 2 iPhone 3GS 3 Sony Ericsson X8
Slide 10: 4G roll out
4G roll out NETWORK AND TERMINALS COMMERCIALLY LAUNCHED PLAN ON TRACK 15-11-2010 • 4G Core network installed and operational • Roll out started of new combined 2G and 4G network in Stockholm, Gothenburg, Malmö, Lund & Karlskrona • >350 sites swapped to date • 30 – 50 sites will be swapped each week
Slide 11: Highlights Tele2 Western Europe
Highlights g g Tele2 Western Europe • The Netherlands - BBned acquisition completed • Germany - Continued strong EBITDA contribution in fixed telephony of 42 percent - Sold shares in Plusnet • Austria - Continued good progress in restructuring program leading to sequential improvement of EBITDA cont
Slide 12: Tele2 Netherlands: Revenues, segments & focus areas
Tele2 Netherlands: Revenues, segments & focus areas Share of total revenue 2010 Tele2 NL network Corporate Fixed & BB (22%) SME Fixed & BB (7%) Wholesale (10%) IRU • Tele2 Business is the largest • Big potential in addressing SME • Shift from voice to more data. Leeuwarden competitor to KPN. That po
Slide 13: Highlights Tele2 Baltic Region
Highlights g g Tele2 Baltic Region g • Stabilizing economy leading to better operational environment • Improved demand for postpaid services • Investment in network capabilities, as demand for mobile internet increases - Tele2 Estonia was awarded 4G license 13 2010-10-20
Slide 14: Highlights Tele2 Croatia
Highlights g g Tele2 Croatia • Goal to deliver positive free cash flow 2H 2011 on track • Solid customer intake despite high seasonal churn • Tele2 launched 21 Mbps in its 3G network 14 2010-10-20
Slide 15: Highlights Tele2 Kazakhstan
Highlights g g Tele2 Kazakhstan • During the quarter, Tele2 added 114,000 new customers in Kazakhstan, a sequential improvement of the total customer stock by 52 percent. • Focus on widening the distribution network throughout the country • Interconnect lowered as of 2011 with good support from NRA
Slide 16: Agenda
Agenda g About Q3 2010 Financial review G id Guidance and dCConcluding l di remarks k 16 2010-10-20
Slide 17: Q4 2010 group results
Q4 2010 g group results SEK million Q4 10 Q4 09 Change % Net Sales 10,109 9,953 2% EBITDA 2,488 2,263 10% - EBITDA margin (%) 25% 23% Depreciation and joint venture -975 -888 - Depreciation of Net sales (%) 10% 9% O One-off ff items it -157 -64 EBIT 1,356 1,311 Normalized EBIT 1,513 1,375 - Normaliz
Slide 18: Taxes
Taxes Taxes in income statement Q4 2010 Q3 2010 Q2 2010 Q1 2010 Normal -277 -441 -348 -339 One-Off 175 1049 -73 - Total -102 608 -421 -339 Taxes in cash flow Q4 2010 Q3 2010 Q2 2010 Q1 2010 Normal -160 160 -152 152 -195 195 -233 233 • Administrative Court of Appeal approved Tele2’s claim for a deduc
Slide 19: Currency movements (vs SEK)
Currencyy movements ((vs SEK)) YoY Difference in Q4 2010 Q3 2010 Q2 2010 Q1 2010 YTD Ave FX Rates, 2010 vs 2009 EUR -10% -10% -10% -9% RUB -1.5% 1 5% 0 5% 0,5% +/ 0 +/- -2% 2% End of Quarter Spot p rate Q4 2010 Q3 2010 Q2 2010 Q1 2010 vs 31/12-2009 EUR -13% -12% -8% -6% RUB -6% 6% -7,5% 7 5% 3% 1% •
Slide 20: Cash flow for Q4 2010
Cash flow for Q4 2010 SEK million Q4 10 Q4 09 OPERATING ACTIVITIES Cash flow from operations, less paid taxes 2,311 2,560 Taxes paid -160 -205 Changes in working capital -374 346 CASH FLOW FROM OPERATING ACTIVITIES 1,777 2,701 INVESTING ACTIVITIES CAPEX -1,163 -1,048 Cash Flow after CAPEX 614 1,653
Slide 21: Group financial profile
Group financial profile Net debt Net debt incl. JV Net debt/ EBITDA 2010 Net debt incl. JV/ EBITDA 2010 12 1,40 SEK BS 10 1,20 8 1,00 0 80 0,80 6 0,60 4 0,40 2 0,20 0 0,00 Q4 07 7 Q1 08 8 Q2 08 8 Q3 08 8 Q4 08 8 Q1 09 9 Q2 09 9 Q3 09 9 Q4 09 9 Q1 10 0 Q2 10 0 Q3 10 0 Q4 10 0 21 2010-10-20
Slide 22: Net debt and dividend targets
Net debt and dividend targets g • Shareholder remuneration – “Tele2 will seek to pay a progressive ordinary dividend of 50 percent or more of net income excluding one-off items. Extraordinary dividends and the authority to purchase Tele2’s Tele2 s own shares will be sought when the anticipated total
Slide 23: ROCE
ROCE 25,0% 24,0% 23,0% 22,0% 21,0% 20,0% 19,0% 18,0% 17,0% 16,0% 15,0% 14,0% 13,0% 12,0% 11,0% 10,0% 9,0% 8,0% 7,0% 6,0% as | a4 at | az | as | o at | a2 | as | a ar | az | as | o 2007 2008 2009 2010 TELE2
Slide 24: Agenda
Agenda g About Q4 2010 Financial review G id Guidance and d Concluding C l di remarks k 24 2010-10-20
Slide 25: Tele2 general group targets
Tele2 g general g group targets g • B t Deal Best D l position iti • g Targetingg a long-term g mobile EBITDA margin on own infrastructure of at least 35 percent • All operations should have the ambition of reaching ROCE of at least 20 percent • The capability to reach a top 2 position, in terms of
Slide 26: Group outlook (changed)
Group outlook ((changed) g ) The following g assumptions p should be taken into account when estimating g 2011 results for the Group: •Tele2 T l 2 fforecasts t a corporate t tax t rate t in i the th range off 26-27 26 27 percentt excluding one-off items. The tax payment will affect cash flow by appr
Slide 27: Sweden outlook (changed)
Sweden outlook ((changed) g ) The following g assumptions p should be taken into account when estimating g results for the Swedish mobile operations in 2011: •Tele2 T l 2 expects t mobile bil revenue to t grow with ith hi high h single i l didigits. it Tele2 expects a similar EBITDA contribution in
Slide 28: Norway outlook (new)
Norwayy outlook ((new)) The following g assumptions p should be taken into account when estimating g results for the Norwegian mobile operations in 2011: •Tele2 T l 2 expects t an EBITDA contribution t ib ti off SEK -100 100 million illi d due tto llower interconnect tariffs and start up costs relat
Slide 29: Russia outlook (changed)
Russia outlook ((changed) g ) Tele2 has GSM licenses in 37 regions g in Russia covering g approximately 61 million inhabitants. The following assumptions should be taken into account when estimating the operational performance of the total operations in Russia in 2011: •Subscriber base should reach
Slide 30: Kazakhstan outlook (changed)
Kazakhstan outlook ((changed) g ) The following assumptions should be taken into account when estimating the operational performance of the total operations in Kazakhstan in 2011: •EBITDA contribution in 2011 should be approximately SEK -500 million. •Capex in Kazakhstan should be in the range of SE
Slide 31: Croatia outlook (unchanged)
Croatia outlook ((unchanged) g ) • T l 2C Tele2 Croatia ti will ill reach h ffree cash h fl flow b break-even k b 2H 2011 by 31 2010-10-20
Slide 32: Concluding remarks
Concluding g remarks Russia 2011: Also an investment year • Strong customer intake and • Russia EBITDA contribution in market area Russia • Kazakhstan Nordic • Solid mobile revenue growth in • Sweden market k t area Nordic N di - 4G Western Europe g • Further strengtheningg its p position • Norway i
Slide 33: Q&A
Q&A 33 2010-10-20
Slide 34: Appendix A
Appendix A 34 2010-10-20
Slide 35: Group mobile EBITDA
Group mobile EBITDA 35 2010-10-20
Slide 36: MoU and ARPU development
MoU and ARPU development Sweden Russia 220 260 60 240 240 200 50 220 SEK SEK 220 180 40 200 200 160 180 30 180 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 ARPU MoU ARPU MoU • ARPU development – Swedish seeingg normal seasonality, y, supported pp by y data tren
Slide 37: Tele2 Sweden mobile
Tele2 Sweden mobile 37 2010-10-20
Slide 38: Tele2 Sweden mobile (contd)
Tele2 Sweden mobile (contd) ( ) 38 2010-10-20
Slide 39: Tele2 Norway mobile
Tele2 Norwayy mobile 39 2010-10-20
Slide 40: Tele2 Norway mobile (contd)
Tele2 Norwayy mobile ((contd)) 40 2010-10-20
Slide 41: Tele2 Russia mobile
Tele2 Russia mobile 41 2010-10-20
Slide 42: Tele2 Russia mobile (contd)
Tele2 Russia mobile (contd) ( ) 42 2010-10-20
Slide 43: Tele2 Baltic mobile
Tele2 Baltic mobile 43 2010-10-20
Slide 44: Tele2 Baltic mobile (contd)
Tele2 Baltic mobile (contd) ( ) 44 2010-10-20
Slide 45: Tele2 Croatia mobile
Tele2 Croatia mobile 45 2010-10-20
Slide 46: Tele2 Croatia mobile (contd)
Tele2 Croatia mobile (contd) ( ) 46 2010-10-20
Slide 47: Appendix B
Appendix B 47 2010-10-20
Slide 48: Financial items Q4 2010
Financial items Q4 2010 SEK million Q4 10 Q4 09 Change External Net interest expenses -190 -9 -181 E h Exchange rate t differences, diff external t l 71 -61 61 +132 132 Other financial items -48 -24 -24 -167 -94 -73 Exchange rate differences, intragroup 12 -30 +42 Financial items -155 -124 -31 48 20
Slide 49: Cash flow development
Cash flow development C h fl Cash flow ffrom operating ti activities ti iti C h fl Cash flow after ft CAPEX 2.800 2.400 (SEK millioon) 2.000 1.600 1 200 1.200 800 400 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 49 2010-10-20
Slide 50: Group net intake per segment
Group net intake per segment g 50 2010-10-20
Slide 51: Group customer stock
Group customer stock • Strong intake in the mobile segment – Driven by Russia adding 755,000 new customers in Q4 2010 51 2010-10-20
Slide 52: Group EBITDA
Group EBITDA m=Mobile mmFixed broadband mmFixedtelephony mmOther --Group EBITDA margin 3000 - + 30% 2500 - + 28% — 2000 - S ° = 1500 4 y 26% < uu 1000 - + 24% ™ 500 - ; + 22% 509 | 0209 Q309 Q409 Q110 Q210 Q310 Q410] ooo, TELE2
Slide 53: Group fixed broadband EBITDA
Group fixed broadband EBITDA 53 2010-10-20
Slide 54: Group fixed telephony EBITDA
Group fixed telephonyy EBITDA 54 2010-10-20
Slide 55: Group EBIT
Group EBIT m=Mobile mmFixed broadband mmFixedtelephony mmOther -#-Group EBIT margin 2500 - - 25% E 2 000 20% & @ WW & 1500 - ” ~ 15% 1000 - -~ 10% 500 - 0 [ 5% Q309 409 110 @Q210 @310 410 -500 - - 0% TELE2
Slide 56: Group CAPEX
Group CAPEX Capex (SEK million) =m Mobile mam Fixed broadband mam Fixed telephony lm Other = Capex/Net sales 1400 - - 14% 1200 + 12% 1000 - 800 + 10% 600 - _ 3% 400 - + 6% 200 - 0 4% Q3 09 Q4 09 Q110 Q210 Q3 10 Q410 TELE2
Slide 57: 57 2010-10-20
57 2010-10-20