THIRD QUARTER 2010 October 20 2010
AGENDA About Q3 2010 Financial review Guidance and Concluding remarks
2
2010-10-20
Third quarter 2010
HIGHLIGHTS Q3 • Group – Total customer base amounting to more than 30 million customers. Net customer intake for the group of almost 1.3 million – Net sales grew by 2 percent. Currency-adjusted net sales grew by 6 percent, driven by mobile sales
– EBITDA grew by 13 percent. Currency-adjusted EBITDA grew by 17 percent. EBITDA margin amounted to 28 (25) percent
• • • •
3
Nordic Russia Central Europe & Eurasia Western Europe
2010-10-20
Third quarter 2010
HIGHLIGHTS TELE2 SWEDEN •
Increased mobile revenue growth to 10 percent
•
Adding 103,000 mobile customers
•
Mobile EBITDA margin 34 (34) percent
2300
12%
2200
10%
2100
8%
2000
6%
1900
4%
1800
2%
1700
0%
Q2 09
4
Postpaid
2010-10-20
Q3 09
Q4 09
Q1 10
Third quarter 2010
Q2 10
Q3 10
Prepaid
EBITDA-margins
120
40%
100
(thousands)
(SEK Million)
Mobile net sales Mobile YoY net sales growth
80
35%
60 40
30%
20 0 -20 -40
25%
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10 20%
SHIFT TOWARDS SMART PHONES •
Smartphones demanded by mass market – Shift driven by increased variety of smartphones combined with an increased awareness of the possibilities of a mobile internet access
Regular Smartphone phone : customers customers Data usage per month (Mb)
1 : 40
MoU*
1 : 1.4
ASPU**
1 : 1.7
Proportion based scale where regular phone usage is base * Out-going minutes ** ARPU Excluding operator revenue and installments 5
2010-10-20
Third quarter 2010
Top 10 phone sales (AugSep) 1
iPhone4
2
Sony Ericsson X10 Mini Pro
3
iPhone 3GS
4
Samsung Galaxy S
5
HTC Desire
6
Sony Ericsson X10 Mini
7
HTC Wildfire
8
Sony Ericsson X10
9
Sony Ericsson Elm
10
Nokia 6700 Slide
HIGHLIGHTS TELE2 RUSSIA • Third and fourth new regions now EBITDA break-even
Kaliningrad Orel Tula
• 1,170,000 (1,100,000) new customers in Q3 2010
Tomsk
New regions
EBITDA - New regions EBITDA - Total margin
EBITDA - Old regions
1000
37%
800
36%
600
35%
400
34%
200
33%
0
32%
-200
31%
Net Intake - New regions Net Intake - Old regions
1050 (In thousands)
(SEK million)
1250
850 650
450 250
50 Q3 10
Q2 10
Q1 10
Q4 09
Q3 09
Q2 09
Third quarter 2010
Q3 10
Q2 10
Q1 10
Q4 09
2010-10-20
Q3 09
Q2 09
6
-150
7
•
Stabilizing economy leading to better operational environment
•
Strong net intake, adding 55,000 (28,000) customers in the region
Net intake Estonia
Lithuania
Latvia EBITDA
CAPEX
EBITDA - CAPEX
500 400
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
(SEK million)
58 48 38 28 18 8 -2 -12 -22 -32 -42 -52 -62 -72 -82 -92
(SEK million)
(thousands)
HIGHLIGHTS TELE2 BALTIC REGION
300 200 100 0 Q2 09 -100 -200
2010-10-20
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
HIGHLIGHTS TELE2 CROATIA •
Next goal is to deliver positive free cash flow within a year
•
81,000 (70,000) new customers added in Q3 10 Net intake
SEK Million
82 72
20 10 0 -10 -20 -30 -40 -50 -60 -70
EBITDA
52 42 32 22 12 2 -8
Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
8
62
2010-10-20
Third quarter 2010
-18 Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
HIGHLIGHTS TELE2 KAZAKHSTAN •
Preparing for re-launch under Tele2 brand 1H 2011
•
Customer stock of 218 000 in Q3 2010. 18,000 new customers added in September
Net intake 2010
20 10 0 -10 -20 April Maj Jun Jul Aug Sep
9
2010-10-20
Third quarter 2010
HIGHLIGHTS TELE2 WESTERN EUROPE • Netherlands -
BBned acquisition completed
• Germany -
Record high EBITDA margin in fixed telephony of 46 percent EBITDA contribution Austria
Netherlands Netherlands
-
10
2010-10-20
Continued good progress in restructuring program leading to sequential improvement of EBITDA contribution
Third quarter 2010
(SEK million) (SEK million)
• Austria
Austria
Germany Germany
700 700 600 600 500 500 400 400 300 300 200 200 100 100 0 0 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
AGENDA About Q3 2010 Financial review Guidance and Concluding remarks
11
2010-10-20
Third quarter 2010
Q3 2010 GROUP RESULTS SEK million Net Sales
Q3 10
Q3 09
Change %
9,998
9,829
2%
EBITDA
2,751
2,441
13%
- EBITDA margin (%)
28%
25%
Depreciation and joint venture
-876
-924
- Depreciation of Net sales (%)
9%
9%
17
116
1,892
1,633
Normalized EBIT
1875
1517
- Normalized EBIT margin (%)
19%
15%
Financial items
-16
199
Taxes
608
401
2,484
2,233
29
-478
2,513
1,755
One-off items
EBIT
Net result, continuing operations Net result, discontinued operations
Net result 12
2010-10-20
Third quarter 2010
TAXES Taxes in income statement Normal One-Off Total Taxes in cash flow Normal
13
YTD Sep 10
Q3 2010
Q2 2010 Q1 2010
-1,128
-441
-348
-339
976
1049
-73
-
-152
608
-421
-339
YTD Sep 10
Q3 2010
-580
-152
Q2 2010 Q1 2010 -195
•
SEC tax dispute: Oral hearing will take place in the end of November, thereafter the outcome will be announced in 1-2 months
•
The total value of the SEC tax dispute is SEK 4,6 billion
2010-10-20
Third quarter 2010
-233
CURRENCY MOVEMENTS (VS SEK) YTD Avarage 2010 vs 2009
Q3 2010
Q2 2010
Q1 2010
EUR
-10%
-10%
-9%
RUB
0,5%
+/- 0
-2%
Q3 2010
Q2 2010
Q1 2010
EUR
-12%
-8%
-6%
RUB
-7,5%
3%
1%
Fix rate vs 31/12-2009
•
14
EUR/RUB pegged currencies approximately: – 38% of sales and – 33% of EBITDA
2010-10-20
Third quarter 2010
CASH FLOW FOR Q3 2010 SEK million OPERATING ACTIVITIES Cash flow from operations, less paid taxes Taxes paid Changes in working capital CASH FLOW FROM OPERATING ACTIVITIES INVESTING ACTIVITIES CAPEX Cash Flow after CAPEX Acquisition and sale of shares and participations, net
15
2010-10-20
Third quarter 2010
Q3 10
Q3 09
2,733 -152 39 2,620
2,499 -98 186 2,587
-923 1,697 -96 1,601
-1,065 1,522 -208 1,314
Net debt
Net debt incl. JV
Net debt/ EBITDA 2009
Net debt incl. JV/ EBITDA 2009
16
2010-10-20
Third quarter 2010
Q3 10
Q2 10
Q1 10
Q4 09
Q3 09
Q2 09
Q1 09
Q4 08
Q3 08
Q2 08
Q1 08
1,6 1,4 1,2 1 0,8 0,6 0,4 0,2 0 Q4 07
14 12 10 8 6 4 2 0 Q3 07
BSEK
GROUP FINANCIAL PROFILE
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% Q3
Q4
2007
17
2010-10-20
Third quarter 2010
Q1
Q2
Q3
2008
Q4
Q1
Q2
Q3
2009
Q4
Q1
Q2
2010
Q3
GROUP EBITDA Mobile
Fixed broadband
Fixed telephony
Other
Group EBITDA margin
3 000
30%
(SEK million)
2 500
28%
2 000 1 500
26%
1 000
24%
500 22%
0
-500 18
2010-10-20
Q2 09
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
20%
GROUP MOBILE EBITDA Mobile EBITDA on own infrastructure
Mobile EBITDA (MVNO)
Mobile EBITDA margin on own infratsructure
Total mobile EBITDA margin
2 500 34%
(SEK million)
2 000
32% 30%
1 500 28% 1 000
26% 24%
500 22% 0
20% Q2 09
19
2010-10-20
Q3 09
Third quarter 2010
Q4 09
Q1 10
Q2 10
Q3 10
MoU AND ARPU DEVELOPMENT Russia
Sweden
240
200
220 180
180
Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 ARPU
50
220
40
200
30
180
MoU
Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
ARPU
Robust ARPU development –
20
240
200
160
•
60 260
SEK
SEK
220
2010-10-20
Swedish and Russian ARPU grew more than 8 percent in one quarter
Third quarter 2010
MoU
AGENDA About Q3 2010 Financial review Guidance and Concluding remarks
21
2010-10-20
Third quarter 2010
TELE2 GOING FORWARD • Best Deal position • Targeting a long-term 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 customer market share, in an individual country or region
22
2010-10-20
Third quarter 2010
GROUP OUTLOOK (CHANGED) • Tele2 forecasts a corporate tax rate of approximately 22 percent excluding one-off items in 2010. The tax payment will affect cash flow by approximately SEK 800 million in 2010 • The oral hearing of the SEC tax dispute is expected to be conducted the 26 of November and a verdict will be announced 1-2 month(s) later • Tele2 forecasts that CAPEX level in 2010 will not exceed SEK 4,000 million • Earlier SEK 4,200-4,400 million
23
2010-10-20
Third quarter 2010
SWEDEN OUTLOOK (UNCHANGED) • Tele2 will continue to target the postpaid segment, which in the longer term will lead to: – Increased ARPU – Lower churn
• In the short term, this strategy will lead to higher total acquisition costs resulting in: – An EBITDA margin in the range of 33-35 percent depending on customer intake in 2010
24
2010-10-20
Third quarter 2010
RUSSIA OUTLOOK (CHANGED) • • •
Subscriber base should be able to reach 19-20 million by YE 2011 Maintain ARPU growth at 5 percent by 2011 EBITDA 2010-2011 – Old regions’ EBITDA margin should stabilize at 45 percent – Most New regions’ EBITDA will break-even by 18 months (2 years) from launch – Russia’s total EBITDA margin should develop in the range of 34-37 (2732) percent
•
Capex 2010-2011 – Accumulated Capex in Russia should be in the range of SEK 3,500-4,000 million – Earlier SEK 4,500-5,000 million – Selected acquisitions – when available and under right conditions
25
2010-10-20
Third quarter 2010
KAZAKHSTAN OUTLOOK (UNCHANGED)
26
•
Subscriber base should aim to reach 400,000-450,000 by YE 2010
•
Blended ARPU should be in the range of SEK 40-45
•
EBITDA should approximately be: - SEK -250 million in 2010 - SEK -400 to -450 million in 2011
•
Accumulated Capex should be in the range of SEK 1,400-1,600 million by YE 2011
•
Operations in Kazakhstan should be able to reach breakeven within 2 years from the commercial re-launch, which is planned in 1H 2011
2010-10-20
Third quarter 2010
CROATIA OUTLOOK (NEW) •
27
Tele2 Croatia will reach free cash flow break-even by 2H 2011
2010-10-20
Third quarter 2010
CONCLUDING REMARKS Nordic • Accelerated mobile revenue growth Russia • Record high customer intake and EBITDA Central Europe and Eurasia • Improving economy leading to stable cash flow contribution Western Europe • Solid operational performance
28
2010-10-20
Third quarter 2010
2010 an investment year • Russia • Kazakhstan • Sweden - 4G - Spring Mobil • Norway - 3G • Netherlands - BBned
Q&A
29
2010-10-20
Third quarter 2010
Appendix A
30
2010-10-20
Third quarter 2010
TELE2 SWEDEN MOBILE Mobile subscribers
Net intake
3 700
120
3 600 100 3 400
80
3 300 60 3 200 3 100
40
3 000 20 2 900 2 800
0 Q1 09
31
2010-10-20
Q2 09
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
(In thousands)
(In thousands)
3 500
TELE2 SWEDEN MOBILE (contd) Mobile Net sales
EBITDA marg.
EBIT marg.
2 300
40%
2 200 36% (SEK million)
2 100 32%
2 000 1 900
28%
1 800 24% 1 700 1 600
20% Q1 09
32
2010-10-20
Q2 09
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
TELE2 NORWAY MOBILE Mobile subscribers
Net intake
500
12 10
480
(In thousands)
460
6
440
4
420
2 0
400
-2 380
-4
360
-6 Q1 09
33
2010-10-20
Q2 09
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
(In thousands)
8
TELE2 NORWAY MOBILE (contd) Mobile net sales
EBITDA marg.
700
10% 9%
650
8%
(SEK million)
7% 600
6% 5%
550
4%
3% 500
2% 1%
450
0% Q1 09
34
2010-10-20
Q2 09
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
TELE2 RUSSIA MOBILE Mobile subscribers
Net intake
18000
1 200
16000 1 000
12000
800
10000 600 8000 6000
400
4000
200 2000 0
0 Q1 09
35
2010-10-20
Q2 09
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
(In thousands)
(In thousands)
14000
TELE2 RUSSIA MOBILE (contd) Mobile net sales
EBITDA marg.
38%
2 800
37%
2 400 (SEK million)
36% 2 000 35% 1 600
34%
1 200
33%
800
32%
400
31%
0
30% Q1 09
36
2010-10-20
Third quarter 2010
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
TELE2 BALTIC MOBILE
(In thousands)
Mobile subscribers
Net intake
3600
80
3200
60
2800
40
2400
20
2000
0
1600
-20
1200
-40
800
-60
400
-80
0
-100 Q2 09
37
2010-10-20
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
TELE2 BALTIC MOBILE (contd) Estonia Net sales
Lithuania Net sales
Latvia Net sales
EBITDA marg.
1200
40%
(SEK million)
1000
800
35%
600 400
30%
200 0
25% Q2 09
38
2010-10-20
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
TELE2 CROATIA MOBILE 850
100
750
80 60
650
40 550
20 450
0
350
-20
250
-40 Q2 09
39
Net intake
2010-10-20
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
(In thousands)
(In thousands)
Mobile subscribers
TELE2 CROATIA MOBILE (contd) Mobile Net sales
EBITDA marg.
450
5%
400
0%
(SEK million)
350 300
-5%
250 200
-10%
150 100
-15%
50 0
-20% Q2 09
40
2010-10-20
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Appendix B
41
2010-10-20
Third quarter 2010
NET DEBT AND DIVIDEND TARGETS • Shareholder remuneration – “Tele2’s intention is to pay a progressive ordinary dividend to its shareholders over the medium term”
• 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”
42
2010-10-20
Third quarter 2010
Appendix C
43
2010-10-20
Third quarter 2010
FINANCIAL ITEMS Q3 2010 SEK million External Net interest expenses Exchange rate differences, external Other financial items
Exchange rate differences, intragroup Financial items
44
2010-10-20
Third quarter 2010
Q3 10
Q3 09 Change
-89
-111
22
56
138
-82
-40 -73
-10 17
-30 -90
57
182
-125
-16
199
-215
CASH FLOW DEVELOPMENT Cash flow after CAPEX
Cash flow from operating activities
2 800
(SEK million)
2 400 2 000
1 600 1 200 800
400 Q1 09
45
2010-10-20
Q2 09
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
GROUP NET INTAKE PER SEGMENT Mobile
Fixed broadband
Fixed telephony
1 500 1 300
(In thousands)
1 100 900 700 500
300 100 -100 -300 Q2 09
46
2010-10-20
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
GROUP CUSTOMER STOCK Group Customer Stock Mobile
Fixed Broadband
Group Mobile Customer Stock
Fixed Telephony
25 000 20 000
15 000 10 000
20 000
15 000 10 000 5 000
Q2 09 Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Strong intake in the mobile segment – Driven by Russia adding 1,170,000 new customers
2010-10-20
Prepaid voice
0
0
47
Postpaid voice
25 000
5 000
•
Mobile Internet
30 000 (In thousands)
(In thousands)
30 000
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
GROUP FIXED BROADBAND EBITDA Fixed broadband
Fixed broadband EBITDA margin
(SEK million)
400
25% 20%
300
15% 200 10% 100
5%
0
0% Q2 09
48
2010-10-20
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
GROUP FIXED TELEPHONY EBITDA Fixed telephony
Fixed telephony EBITDA margin
500
33%
(SEK million)
32% 31% 30%
400
29% 28% 27% 26%
300
25% Q2 09
49
2010-10-20
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
GROUP EBIT
(SEK million)
Mobile
Fixed broadband
Fixed telephony
Other
Group EBIT margin
2 500
25%
2 000
20%
1 500
15%
1 000 10%
500
5%
0 -500 50
2010-10-20
Q2 09
Third quarter 2010
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
0%
(SEK million)
GROUP CAPEX Mobile
Fixed broadband
Other
Capex/sales
Fixed telephony
1400
14%
1200
12%
1000
10%
800
8%
600
6%
400
4%
200
2%
0
0% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
In 2010: Tele2 forecasts a CAPEX level in the range of SEK 4,600 – 4,800 million 51
2010-10-20
Third quarter 2010
52
2010-10-20
Third quarter 2010