THIRD QUARTER 2016 October 20, 2016 Tele2 AB
THIRDQUARTER 2016October 20, 2016
Tele2 AB
Delivering on our long term strategy
Winning People & Culture
Value Champion
Step-Change Productivity
Focused Technology
Choices
• Swedish 4G geographic coverage reaches 88%• Baltics 4G population coverage now at 99% • Netherlands data on-loading on own network at 77%
• Group mobile end-user service revenue up 6%• Sweden mobile end-user service revenue growth of 2%• Netherlands mobile end-user service revenue up 15%
• Strong EBITDA contribution from Sweden, Baltics and Kazakhstan• Kazakhstan JV synergy plan progressing well• Challenger program on track for SEK1bn per annum benefits
2
• Integration of Altel employees on track• Preparing for integration of TDC
Group highlights – Q3 2016
3
Q3 2016 % Change Reported
LFL is constant currencies and pro forma for Altel
% ChangeLFL
Mobile end-user service revenue(SEK billion)
3.64 +6% +6%
EBITDA(SEK billion) 1.56 -2% -1%
Net sales(SEK billion) 6.96 +3% +1%
Sweden – FinancialsNet sales(SEK million)
Mobile end-user servicerevenue (SEK million)
Q3 Highlights
EBITDA and EBITDA margin(SEK million)
1 889 1 841 1 797 1 821 1 928
Q3 15 Q4 15 Q1 16 Q2 16 Q3 160
500
1 000
1 500
2 000
2 500
+2%0% +5%
4
– Record mobile end-user service revenue driven by seasonal ASPU increase and strong intake
– Net sales flat mainly due to higher mobile revenues, offset by lower fixed telephony and wholesale revenues
– EBITDA uplift through improved data monetization, strong roaming and realized efficiencies from Challenger initiatives
3 100 3 299 3 053 3 018 3 095
Q3 15 Q4 15 Q1 16 Q2 16 Q3 160
500
1 000
1 500
2 000
2 500
3 000
3 500 1 014 946 894 8461 068
33% 29% 29% 28%35%
0%
10%
20%
30%
40%
50%
60%
Q3 15 Q4 15 Q1 16 Q2 16 Q3 160
200
400
600
800
1 000
1 200
Sweden – Improving trendsConsumer postpaid mobile end-user service revenue
Share of sales with bundle >0.5GB
– Consumer postpaid mobile end-user service revenue up 7% driven by increased data consumption and strong Comviq customer intake
– Tele2 increasingly attracting customers to premium value buckets
– New Tele2 advertising campaign, launched post quarter end, to strengthen Tele2 within our dual brand strategy
Q3 Highlights
Geographic coverage2G/4G
Q3 15 Q3 16
5
+7%
73%84% 85%
Q1 16 Q2 16 Q3 16
83%
88%
Q3 15 Q3 16
Baltics – Financials
Q3 Highlights
6
Net sales(SEK million)
EBITDA and EBITDA margin(SEK million)
Mobile end-user service revenue (SEK million)
488 476 468 477 521
Q3 15 Q4 15 Q1 16 Q2 16 Q3 160
100
200
300
400
500
600
263 257 246 256287
32% 32% 32% 33% 32%
0%
10%
20%
30%
40%
50%
60%
Q3 15 Q4 15 Q1 16 Q2 16 Q3 160
50
100
150
200
250
300
350832 815 770 787884
Q3 15 Q4 15 Q1 16 Q2 16 Q3 160
100
200
300
400
500
600
700
800
900
1 000
– Net sales driven by continued demand for data services
– Mobile end-user service revenue growth driven by data monetisation and strong summer marketing campaigns
– Strong EBITDA performance continues
+7%+6% +9%
Baltics – Data monetization continues
7
ASPU development Share of 4G capable smartphones in base
Q3 Highlights
4G population coverage
– Strong data monetization driven by prepaid to postpaid transition and data centric pricing
– Data consumption stimulated by an increasing rate of 4G handset penetration
– 99% network coverage drives higher data usage and purchase of top-up data buckets
82%
99%
Q3 15 Q3 16Q3 15 Q3 16
17%
32%
Q3 15 Q3 16
+7%
Netherlands – Financials
Q3 Highlights– Net sales up due to strong mobile momentum, offset by decline in fixed
– Strong mobile end-user service revenue driven by almost 20% increase in customer base year-on-year
– EBITDA impacted by investments related to mobile launch and decline in fixed
– An impairment of SEK 2.5bn was recognized in Q3
8
Net sales(SEK million)
EBITDA (SEK million)
Mobile end-user service revenue (SEK million)
364403
322 336419
Q3 15 Q4 15 Q1 16 Q2 16 Q3 160
50
100
150
200
250
300
350
400
450
122
35
-31
-116
-2
Q3 15 Q4 15 Q1 16 Q2 16 Q3 16
-150
-100
-50
0
50
100
150
1 440 1 512 1 441 1 452 1 478
Q3 15 Q4 15 Q1 16 Q2 16 Q3 160
200
400
600
800
1 000
1 200
1 400
1 600
+3% -102%+15%
Netherlands – Continuing momentumSpontaneous brand awareness & brand consideration (Memo2)
Share of total new postpaid(GfK)
Data usage on own network
Q3 Highlights– Awareness and consideration continued to build behind our innovative “Fun Rebel Campaign”, competitive offerings and network performance
– Maintaining a strong market share of new postpaid contracts, despite increased competitive pressure
– Good progress in data on-loading on own network driven by network rollout at 98% outdoor and 83% indoor coverage
– Roll-out of VoLTE initiated with over 50k subscribers
9
27%
77%
Pre-launch Sep 164G
34%
43%41%
56%
Pre-launch Sep 16
Awareness Consideration
12%
19%
Pre-launchOct 15
Aug 16
– Significant mobile end-user service revenue growth due to pricing and an increasing customer base
– Net sales lower this quarter due to Altel handset sales campaign launched in Q3 last year
– Positive EBITDA development driven by revenue growth, improved operating leverage and synergies from JV integration
Kazakhstan – Financials
10
Q3 Highlights
LFL is constant currency and pro forma for Altel
Net sales, LFL (SEK million)
EBITDA and EBITDA margin, LFL (SEK million)
Mobile end-user service revenue, LFL (SEK million)
358 377 390 404 428
Q3 15 Q4 15 Q1 16 Q2 16 Q3 160
50
100
150
200
250
300
350
400
450583664
513 540 575
Q3 15 Q4 15 Q1 16 Q2 16 Q3 160
100
200
300
400
500
600
700
+20%-1% +204%
26
-35
13
44
794%-5%
3%8%
14%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
Q3 15 Q4 15 Q1 16 Q2 16 Q3 16-40
-20
0
20
40
60
80
100
120
140
80%
Closing Q1 16 Q2 16 Q3 16
Plan Progress
Kazakhstan – Strong performance4G outdoor population coverage JV integration
Q3 Highlights
11
Customer base, LFL(thousands)
LFL is pro forma for Altel
– 4G outdoor population coverage remains a competitive advantage
– Customer base continues to grow year-on-year, despite competitive pressure
– JV integration plan on track
5 7676 384
Q3 15 Q3 16
+11%
30%
70%
Q4 16 E Q3 15
Tele2
Kcell / Beeline
80%
Challenger program on track
Simplify% of products harmonized
on shared platforms
Discipline% of spend strategically
sourced & procured
Consolidate% of reduction in IT OpEx
as share of revenue
Transform% of staff in
Shared Operations
2016 target 2018 targetBaseline
30% 40% 60%
40% 75% 80%
0% 5% 20%
12% 18% 25%
Key progress areas in the quarter
Data analytics and optimized marketing spend driving improved ROI
Transfer of ~90 Dutch FTEs to Indian partner started this quarter, bringing total to ~200 FTEs
Productivity improvement program announced in Sweden, with an estimated reduction of 225 FTEs
Product simplification initiative progressing. More than 900 products closed year-to-date
12
Financial Overview
13
3 422
3 641
3933
55
78-7
Q3 15 Sweden Baltics NL KZ RoW Oth Q3 16
Mobile end-user service revenue
Tele2 Group(SEK million)
14
3 4223 282 3 168
3 3503 641
Q3 15 Q4 15 Q1 16 Q2 16 Q3 16
+6%
Development per market(SEK million)
21
1 599 1 56254 24
-124
29 12
-32
Q3 15 Sweden Baltics NL KZ RoW Oth Q3 16
EBITDA
Tele2 Group(SEK million)
15
-2%
Development per market(SEK million)
1 599
1 3371 226
1 087
1 562
23,5%19,3% 19,0%
16,3%22,4%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
0
200
400
600
800
1000
1200
1400
1600
Q3 15 Q4 15 Q1 16 Q2 16 Q3 16
EBITDA margin
CAPEX
Tele2 Group(SEK million)
16
-16%
Development per market (SEK million)
932
779
51
-15
-139
11
-63
2
Q3 15 Sweden Baltics NL KZ RoW Oth Q3 16
932
1 223 1 154
820 779
13,7%17,6% 17,9%
12,3% 11,2%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
0
200
400
600
800
1000
1200
Q3 15 Q4 15 Q1 16 Q2 16 Q3 16
CAPEX / Net sales
Free cash flowTotal operations
Tele2 Group(SEK million)
Development (SEK million)
Free cash flow = Cash flow from operating activities and CAPEX paid17
169
-291
-154
139
838
-500
-300
-100
100
300
500
700
900
Q3 15Q4 15 Q1 16
Q2 16 Q3 16
169
838
139
-37
51
-46
70649
-54
Q3 15 EBITDA Interest etc TaxesWorkingcapital CAPEX
One-offitems Q3 16+396%
Debt position and financial leverageEconomic net debt to EBITDA 12 m rolling
18
9,8 9,9 9,4
11,7 11,0
0,00
0,25
0,50
0,75
1,00
1,25
1,50
1,75
2,00
2,25
0,0
2,5
5,0
7,5
10,0
12,5
Sep 2015 Dec 2015 Mar 2016 Jun 2016 Sep 2016
Economic net debt Economic net debt to EBITDA
Economic net debt is defined as net debt excluding liabilities from Kazakhtelecom and liabilities guaranteed by Kazakhtelecom
2,13
LeverageSEK billion
Rights Issue
19
Background
• Acquisition of TDC Sweden announced on 21st June to strengthen our B2B position in Sweden (not conditional upon equity financing)
• In conjunction, the company announced the intention to raise equity through a Rights issue
• EGM to be held on 27th October
Equity financing
• Financing through equity issue with preferential rights for existing shareholders to maintain the Company’s financial strength
• Tele2’s largest shareholder, Kinnevik, has committed to subscribe for its rights
• Nordea Bank AB has entered into a standby underwriting commitment for the remaining portion
Financial guidance 2016
* Based on LFL which is constant currencies and pro forma for Altel20
Net sales(SEK billion)
EBITDA(SEK billion)
26 – 27
4.6 – 5.0
CAPEX(SEK billion) 3.7 – 4.1
Mobile end-user service revenue
Mid-single digit % growth*
Summary
21
Key priorities moving forward
Sustain momentum in Sweden
Continue to monetize 4G investments
Continued integration of Altel in Kazakhstan
Execute on Challenger Program
Closing of TDC
22
Winning People & Culture
Value Champion
Step-Change Productivity
Focused Technology
Choices
Tele2’s Way2Win
The Tele2 Way
We are challengers, fast-movers and will always offer our customers what they need for less
We will be champions of customer value in everything we do
How we win
Focused Technology
Choices
Value Champion
Step-Change Productivity
Winning People & Culture
Vision
Mission
Where we play
Mobile access
Our current footprint
Residential and Business
IoT
Responsible Challenger
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THEEND