Download - New York & Toronto Roadshow June 2010
NEW YORK & TORONTO ROADSHOWROADSHOW
28-30 June 2010
AGENDAAGENDA
Tele2 in Brief
Market Area Update
Fi i l iFinancial review
Concluding remarksConcluding remarks
2
TELE2 MOBILE EASTERN EUROPEAN GROWTH MACHINE
• 28 million customers in 11 countries
• We have grown our mobile footprint, today covering more than 100 illi l ith t ll d li
6%Mobile Fixed broadband Fixed telephony Other operations
million people with controlled licenses
15%
Percentage of sales, 2009
62%17%
3
TELE2 FOOTPRINTTELE2 FOOTPRINTRUSSIAMobile
SWEDENFull product suite
NORWAYMobile, Fixed telephone
ESTONIAMobile, Fixed telephone
LATVIAM bil Fi d t l hMobile, Fixed telephone
LITHUANIAFull product suite
KAZAKHSTAN
GERMANYFixed broadband, fixed telephony
NETHERLANDSFull product suite
CroatiaMobile
KAZAKHSTANMobile
fixed telephony
AUSTRIAFixed broadband, fixed telephony
4
TELE2 ALWAYS PROVIDES THETELE2 ALWAYS PROVIDES THE
P i l d hi• Price leadership through best in class cost controlclass cost control
• Price winning gquality network
• Standardized product portfolio
5
AGENDAAGENDA
Tele2 in Brief
Market Area Update
Fi i l iFinancial review
Concluding remarksConcluding remarks
6
MARKET AREA NORDICSMARKET AREA NORDICSMobile• Positive revenue growth• Solid customer intake in postpaid• Secured No1 market share position in
prepaid mobile internet in Sweden• Roll-out of 4G in Sweden and 3G in NorwayMarket strategy• Further develop and calibrate our increased
focus on mobile postpaid segment
7
SHIFT TOWARDS SMART PHONESSHIFT TOWARDS SMART PHONESSmartphones 2008Smartphones 2010
HIGH
ARPU
LOW
ARP ARPUTele2/Comviq target segment
ARPU
• Smart Phones are becoming mass market, mainly driven by iPhone- Smartphone prices are coming down which will drive the shift even faster
• Demand for mobile data is increasing, also for handset customers- Data represented 40% of the revenue growth in the residential mobile market 2009
• Fixed to Mobile substitution- 14% of Swedish population have actively substituted their fixed phone with a mobile only service
• Prepaid market value is declining in relation to Postpaid- Prepaid has gone from 35% of total market value in 2005 to 29% in 2009. We
8
predict that it will drop further down to 20% in 2015
MARKET AREA RUSSIAMARKET AREA RUSSIAMobile• Record high EBITDA margin in mature
regions in Q1 2010• Record high net intake in Q1 2010
– Adding 949 000 customers– 16.1 million customers as of May 2010
Market strategy• Continue unique distribution strategy• Increase customer life time value in the old
iregions• Focus on customer intake in the new
i9
regions
RUSSIAN TELECOM MARKETRUSSIAN TELECOM MARKET
Player License Cover, # Regions May 2010
MTS 82 regions 69 845 174
MegaFon 83 regions 52 665 805g g
Vimpelcom 80 regions 50 950 904
TELE2 37 regions 16 102 000
*Source: ACM
10
MOBILE SUBSCRIBER PENETRATIONMOBILE SUBSCRIBER PENETRATION
Penetration levels in Tele2 licensed areas• Market penetration: 146%*• Active SIM penetration: 95%**• Estimated human penetration: 82%***
11
* & ** Source: ACM* and internal TELE2 research**
TELE2 RUSSIA IS EXPANDINGTELE2 RUSSIA IS EXPANDING
• 37 regions with a population coverage of 61 million
• Over 16 million customers- 339 000 in May- 363 000 in April
12
HIGHLIGHTS TELE2 RUSSIAHIGHLIGHTS TELE2 RUSSIANet Intake - New regions Net Intake - Old regions EBITDA margin
36%
38%
1200
1400
32%
34%
800
1000
nds)
26%
28%
30%
600
800
(In th
ousa
n
22%
24%
26%
200
400
(
20%0Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10
13
CLEAR BUSINESS GOALS THROUGH EVOLUTION
base
DefenderDefender 17 REGIONS
RetentionARPU protection
p/ S
ubsc
riber
ChallengerChallenger
17 REGIONS
S b ib i iti
Subscribers acquisitionARPU protection
Retention
ce le
ader
ship
NewcomerNewcomer
Subscribers acquisition
Perc
eive
d pr
ic
20 REGIONS
1,5 – 2 years 2,5 – 3 years >3 years
P
14
TELE2 RUSSIA OLD REGIONSTELE2 RUSSIA – OLD REGIONS
15
TELE2 IS NUMBER ONE IN 14 OF 17 OLD REGIONS
40%%.
Tele2 share Beeline Share MTS Share Megafon Share Other Share
37%
30%
35%
40%
regi
ons,
%
21%21%18%20%
25%
in e
xist
ing
3%5%
10%
15%
rket
sha
re i
3%
0%
5%
As of January 2010
Mar
Source: Internal Tele2 research
16
TELE2 RUSSIA NEW REGIONSTELE2 RUSSIA NEW REGIONS
KALININGRAD PETROZAVODSK
NARYAN-MAR
PSKOV
TVER VOLOGDA
BRYANSK KALUGAKOSTROMA
OREL TULA
TAMBOV
RYAZANVLADIMIR
KRASNODAR
KIROV
KOSTROMA
TURAADYGEI
TOMSK
NOVOSIBIRSKNOVOSIBIRSK
17
MARKET AREA CENTRAL EUROPE AND EURASIAMobileMobile • Defend market share and expand when
possiblepossible• First signs of economic recovery in the Baltic
statesstatesMarket strategy• Economic turmoil creates opportunities for aEconomic turmoil creates opportunities for a
price leader in the Baltic states• Reach break even in Croatia 2H 2010
18
HIGHLIGHTS TELE2 BALTIC REGIONHIGHLIGHTS TELE2 BALTIC REGION
400
500 EBITDA CAPEX EBITDA - CAPEX
200
300
lion)
100
(SE
K m
ill
-100
0Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10
-200
19
KAZAKHSTAN
• Market entrance in line with expansion strategy in
KAZAKHSTAN
• Market entrance in line with expansion strategy in Eurasia
• New CEO in place
Operate nder the brand name NEO• Operate under the brand name NEO- Re-launch H2 2010
• Network roll-out
20
MARKET AREA WESTERN EUROPEMARKET AREA WESTERN EUROPECorporate segment p g• Gold standard for the group in the
NetherlandsMarket strategy• Investing for the future in the Netherlandsg• Further restructuring in Austria• Cash flow focus in Germanyy
21
AGENDAAGENDA
Tele2 in Brief
Market Area Update
Fi i l iFinancial review
Concluding remarksConcluding remarks
22
Q1 2010 GROUP RESULTSQ1 2010 GROUP RESULTSSEK million Q1 10 Q1 09 Change %Continuing operations, Net Sales 9,535 9,828 -3%EBITDA 2,358 2,244 5%
EBITDA margin (%) 24 7% 22 8%- EBITDA margin (%) 24,7% 22,8%Depreciation and joint venture -809 -893- Depreciation of net sales (%) 8,5% 9,1%O ff itOne-off items -3 -4
EBIT 1,549 1,351Normalized EBIT 1,546 1,347- Normalized EBIT margin (%) 16,2% 13,7%Financial items 42 -592Taxes -339 -281339 281Net result, continuing operations 1,249 474Net result, discontinued operations 19 197
Net result 1 268 671
23
Net result 1,268 671
CASH FLOW FOR Q1 2010CASH FLOW FOR Q1 2010SEK million Q1 10 Q1 09OPERATING ACTIVITIESCash flow from operations, less paid taxesTaxes paid
2,341-233
1,923-456
Changes in working capital 183 364CASH FLOW FROM OPERATING ACTIVITIES 2,291 1,831
INVESTING ACTIVITIESCAPEX -608 -1,149Cash Flow after CAPEX 1,683 682Acquisition and sale of shares and participations, net -819
864-97585
24
ROCEROCE20%
17%18%19%20%
13%14%15%16%
9%10%11%12%13%
6%7%8%9%
6%Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2007 2008 2009 2010
25
GROUP FINANCIAL PROFILEGROUP FINANCIAL PROFILE
Net debt Net debt incl JV
25 000 2,5
Net debt Net debt incl. JVNet debt/ EBITDA 2009 Net debt incl. JV/ EBITDA 2009
20 000
on)
2
10 000
15 000
SE
K m
illio
1
1,5
0
5 000
(S
0
0,5
0Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
0
26
TELE2 GOING FORWARDTELE2 GOING FORWARD
B t D l iti• Best Deal position – Perceived price leader – Expected quality– Expected quality
• Targeting a long term mobile EBITDA margin on own infrastructure at least 35 percentp
• 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 customer market share, in an individual country or regionregion
27
SWEDEN OUTLOOKSWEDEN OUTLOOK• Tele2 will continue to target the postpaid segment, which in the longer g p p g , g
term will lead to:– Increased ARPU
Lower churn– Lower churn
• In the short term, this strategy will lead to higher total acquisition costs, gy g qresulting in:– A full year EBITDA margin in the range of 33-35 percent depending on
customer intakecustomer intake
28
RUSSIA OUTLOOKRUSSIA OUTLOOK• Subscriber base should be able to reach 19-20 million by YE 2011y• Maintain ARPU growth at 5 percent by 2011• EBITDA 2010-2011
Old regions’ EBITDA margin should stabilize at 45 percent– Old regions EBITDA margin should stabilize at 45 percent– New regions’ EBITDA margin should break even 2 years from launch– EBITDA contribution from new regions should be in the range of SEK -600
to -800 millionto 800 million– Russia’s total EBITDA margin should develop in the range of 27-32
percent • Capex 2010-2011Capex 2010 2011
– Accumulated Capex in Russia should be in the range of SEK 4.5-5.0 billion
• Selected acquisitions – when available and under right conditionsSelected acquisitions when available and under right conditions
29
CROATIA OUTLOOKCROATIA OUTLOOK
”WE WILL REACH EBITDA BREAK EVEN DURING 2H 2010”
30
NET DEBT AND DIVIDEND TARGETSNET DEBT AND DIVIDEND TARGETS• Shareholder remuneration
– “Tele2’s intention over the medium term is to pay a progressively increasing ordinary dividend”
• Long-term financial leverage– “Tele2’s longer-term financial leverage, defined as the
net debt /EBITDA ratio, should be in line with the industry and the markets in which it operates”
• Short-term consideration– “The company needs to take the uncertainties in the financial
markets into consideration and act accordingly”markets into consideration and act accordingly
31
AGENDAAGENDA
Tele2 in Brief
About Q1 2010
R i fRussian focus
Financial reviewFinancial review
Concluding remarksConcluding remarks
32
CONCLUDING REMARKSCONCLUDING REMARKS
N di 2010 i t tNordic• Continued revenue growthRussia
2010 an investment year• Russia• KazakhstanRussia
• Record high EBITDACentral Europe and Eurasia
• 4G Sweden• 3G Norway
• Stable cash flow contributionWestern Europe• Solid operational performanceSolid operational performance
33
MATS GRANRYDMATS GRANRYDAppointed President and CEO of Tele2
• Excellent understanding of emerging markets, technologies and consumer implementation
BackgroundBackground• Head of Northern Europe and Central Asia for Ericsson, AB• Head of MU North Western Europe and Head of Global Customer Account
Vodafone (2009 - 2010)• Head of MU-India/Sri Lanka (2005 - 2009)( )• Head of Business Unit CDMA, Senior Vice President Ericsson (2003 -
2005)• Head of Market Unit North Africa and President Ericsson Egypt (2001 -
2003)Vi P id t E i S d (1997 2001)• Vice President Ericsson Sweden (1997 - 2001)
• Manager Production, Nynäshamns factory (1995 - 1997)• ARRIGO Consultants (1991-1995)• Andersen Consulting (1988-1991)
• Royal Institute of Technology, Stockholm– Master of Science in Mechanical Engineering
34
APPENDIXAPPENDIX
35
TAXESTAXES
Taxes in income statement (MSEK) One-Off Normal ReportedQ1 - -339 -339
Taxes in cash flow statement (MSEK) One-Off Normal ReportedQ1 - -233 -233
In 2010: Tele2 forecast a corporate tax rate of approximately 22 (earlier 20) percent excluding one-off items. The tax payment will affect cash flow by approximately SEK 800 (earlier 700) million due to better than expected operational performance in Tele2 Russia.
36
GROUP NET INTAKE PER SEGMENTGROUP NET INTAKE PER SEGMENT
M bil Fi d b db d Fi d t l h
1 2001 400
Mobile Fixed broadband Fixed telephony
8001 000
1 200
ds)
400
600
thou
san
200
0200
Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10
(In
-400-200 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10
37
GROUP CUSTOMER STOCKGROUP CUSTOMER STOCK
Group Mobile Customer Stock
20 000
25 000
)
Prepaid voice Postpaid voice Mobile InternetGroup Customer Stock
25 000
30 000Mobile Fixed Broadband Fixed Telephony
5 000
10 000
15 000
20 000
(In th
ousa
nds)
10 000
15 000
20 000
25 000
In th
ousa
nds)
0
5 000
Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10
(
0
5 000
Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10
(I
• Strong intake in the mobile segment– Driven by Russia adding 949 000 new customers
38
GROUP EBITDAGROUP EBITDAMobile Fixed broadband Fixed telephony
3 000 26%
p yOther Group EBITDA margin
2 000
2 500
on)
24%
1 000
1 500
SE
K m
illio
22%
%
0
500(S 22%
-500 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 20%
39
GROUP MOBILE EBITDAGROUP MOBILE EBITDA
1 800
Mobile EBITDA on own infrastructure Mobile EBITDA (MVNO)Mobile EBITDA margin on own infratsructure Total mobile EBITDA margin
1 6501 7001 7501 800
n) 30%
32%
34%
1 4501 5001 5501 600
(SE
K m
illio
n
24%
26%
28%
30%
1 3001 3501 4001 450
Q Q Q Q Q Q20%
22%
24%
Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10
40
MoU AND ARPU DEVELOPMENTMoU AND ARPU DEVELOPMENT
Russia
60 240
Sweden
220 260
50
SEK
220200
220
SEK 220
240
260
30
40
Q1 09 Q2 09 Q3 09 Q4 09 Q1 10180
200
160
180
Q1 09 Q2 09 Q3 09 Q4 09 Q1 10
S
180
200
ARPU MoU
Q Q Q Q Q
ARPU MoU• Relatively stable development
– Swedish ARPU being diluted by an increasing customer base in Mobile Internet and g y gsoftness in corporate customer MoU
41
42