Capital Markets DayInessa Galaktionova, Chief Commercial Officer Tele2 RussiaSvetlana Skvortsova, Strategy Director Tele2 ...
Net sales                         EBITDA                    CapExRussia                                                   ...
What has happened since last CMD?64   Tele2 Capital Markets Day 2012
Market share developmentSUBSCRIBERS MARKET SHARE                                                   REVENUE MARKET SHAREPER...
Maintained ARPU expansionBLENDED ARPU                                                                    REPORTED APPMRUB ...
Margin improvement and CAPEX slow-downEBITDA MARGIN                                                                 CAPEX/...
Historical Data KPI Benchmarking vs MarketConsumption (Mb per User)                                                       ...
Tele2 data capabilities VAS Usage                        Subs that use VAS                                  Satisfaction w...
Distribution strategy Life Time Value 2012 (RUR)                                                    GI split by channels  ...
Distribution strategy – Own shops              Tele2                 Beeline               Megafon                   MTS  ...
Customer dataCUSTOMER SERVICE SATISFACTION OVERALLTop-3 on 10 point scale                      89%                        ...
Clear Business Goals Through Evolution                                                                                    ...
Old Regions: Sustainable Growth of ARPU and Subscriber Base Net Intake (‘000 Subs)                Subscriber Base (‘000 Su...
Old Regions: Solid Profitability ProfileRevenue (SEK ‘000)                        +8% Q3’12     EBITDA (SEK ‘000) and EBIT...
New Regions: Considerable and SustainableGrowth     Net Intake (‘000 Subs)             Subscriber Base, (‘000 Subs)   +22%...
New Regions: Solid Profitability Profile Revenue (SEK ‘000)                             +32% Q3’12   EBITDA (SEK ‘000) EBI...
Far East launch                                Launch Date         Total Subs*       Market Share     Sakhalin            ...
Tele2 Russia Cost Efficiency  Sales&Marketing costs / Revenue                                             Customers per Em...
Russia           2,768 employees                                Best-in-class employee                                    ...
Current LTE allocations not fully available 1800 MHz offers great potential700/800 MHz                            LTE FDD ...
Global trends for LTE 1800/Technology Neutrality 130 LTE 1800 devices announced                      • LTE on 1800 MHz ens...
Global trends for LTE 1800/Technology Neutrality Tele2 succesfully                    Regulator requested tested LTE in 18...
MNP – Mobile Number Portability                MNP is expected to be implemented in                Russia from December 1,...
Existing network supportSubscribers, mln 23 22 21 20                                                                      ...
Network capabilitiesTerritory coverage                                                                Population coverage ...
LTE network readiness      All network investments since 2009      are LTE compatible                              • 58% o...
Summary                                      •   The fastest growing company on the                                       ...
CMD2012 - vetlana Skvortsova - Inessa Galaktionova - Market Area Russia
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CMD2012 - vetlana Skvortsova - Inessa Galaktionova - Market Area Russia

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CMD2012 - vetlana Skvortsova - Inessa Galaktionova - Market Area Russia

  1. 1. Capital Markets DayInessa Galaktionova, Chief Commercial Officer Tele2 RussiaSvetlana Skvortsova, Strategy Director Tele2 RussiaDecember 12, 2012
  2. 2. Net sales EBITDA CapExRussia 30% 42% 32% • Continue to grow customer base and maximize the 2G opportunity • Evaluate possibilities to expand carefully through new licenses as well as by complementary acquisitions • Make progress on technology neutrality63 Tele2 Capital Markets Day 2012 * Figures represent contribution to group; YTD Q3 2012
  3. 3. What has happened since last CMD?64 Tele2 Capital Markets Day 2012
  4. 4. Market share developmentSUBSCRIBERS MARKET SHARE REVENUE MARKET SHAREPERCENT PERCENT 40% 35% 35% 30% 30% 25% 25% 20% 20% 15% 9.3% 9.5% 9.7% 15% 8.4% 9.1% 7.0% 7.0% 7.1% 5.6% 7.0% 10% 6.0% 6.7% 10% 4.3% 5.0% 3.8% 4.2% 4.9% 2.7% 5% 5% 0% 0% 2006 2007 2008 2009 2010 2011 Q1-12 Q2-12 Q3-12 2006 2007 2008 2009 2010 2011 Q1-12 Q2-12 Q3-12 MegaFon Tele2 MTS Vimpelcom 65 Tele2 Capital Markets Day 2012 Source: AC&M Consulting, Company data
  5. 5. Maintained ARPU expansionBLENDED ARPU REPORTED APPMRUB RUB400 1.50350300 220 223 218 229 234 1.00250 204 201200150 0.91 0.89 0.89 0.96 0.87 0.50100 50 0 0.00 2008 2009 2010 2011 Q1-12 Q2-12 Q3-12 3Q11 4Q11 1Q12 2Q12 3Q12 MegaFon Tele2 MTS Vimpelcom66 Tele2 Capital Markets Day 2012 Source: AC&M Consulting, Company data
  6. 6. Margin improvement and CAPEX slow-downEBITDA MARGIN CAPEX/RevenuePERCENT PERCENT 60% 39% 37% 38% 40% 34% 35% 35% 32% 20% 22% 20% 15% 0% 9% 12% 2008 2009 2010 2011 Q1-12 Q2-12 Q3-12 3Q11 4Q11 1Q12 2Q12 3Q12 MegaFon Tele2 MTS Vimpelcom67 Tele2 Capital Markets Day 2012 Source: AC&M Consulting, Company data
  7. 7. Historical Data KPI Benchmarking vs MarketConsumption (Mb per User) Internet Users penetration 700 25 45% 600 39% RHS 20 40% 36% 37% 37% 37% 37% 36% 500 34% 34% 400 15 35% 37% 37% 37% 300 10 30% 34% 35% 200 32% 32% LHS 5 25% 30% 100 27% 0 0 20% 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Market Mb per user Tele2 Mb per user MTS Internet Users Tele2 Internet Users USB modem sales (‘000) Data ARPU 4,000 150 122 120 125 107 117 114 3,110 96 99 106 2,890 2,986 3,000 2,694 100 2,152 2,342 2,000 1,497 1,380 1,560 50 1,000 0 0 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Market Data ARPU, RUB Tele2 Data ARPU68 Tele2 Capital Markets Day 2012 Source: AC&M Consulting, Corporate Reports
  8. 8. Tele2 data capabilities VAS Usage Subs that use VAS Satisfaction with VAS usage 40% 100% 20% 90% • So far existing data products meet 91% 89% 89% customer expectations 88% • Usability is the major focus 0% 80% Tele2 MTS Beeline Megafon • Absence of MBB will not be critical in Smartphone Penetration approx. 2 years total Russia • >90% of data usage is social 80% networks, where EDGE speed is Forecast 60% enough for good user experience 40% 20% 0% 2010 2011 2012F 2013F 2014F 2015F 2016F Source: MA FDFgroup, 2Q11-1Q12, Tele2 Regions, Survey69 Tele2 Capital Markets Day 2012 Analysis Mason, Wireless Intelligence
  9. 9. Distribution strategy Life Time Value 2012 (RUR) GI split by channels 100% 2% 2% 7,000 18% 30% 23% 6,000 18% 20% 5,000 14% 50% 4% 8% 17% 4,000 21% 17% 11% 3,000 2,000 30% 31% 32% 1,000 0% 0 AC 2010 AC 2011 AC 2012 Alternative Monobrand Federal Monobrand Local Monobrand On-line Monobrands Monobrand stands On-line dealers Stands telecom Modules telecom Shops Federal telecom dealers Alternative dealers Local telecom dealers dealer dealer B2B • Monobrand channel development • Increasing efficiency of local alternative • B2B and online channels development (higher ARPU and lowest churn) • Balance between Federal telecom channels and effective alternative distribution channels70 Tele2 Capital Markets Day 2012
  10. 10. Distribution strategy – Own shops Tele2 Beeline Megafon MTS 44% GI 42% GI >60% GI 49% GI 0% Own Network 12% Own Network 44% Own Network 67% Own Network 100% Agency Network 88% Agency Network 56% Agency Network 33% Agency Network Total: >400 Total: >2000 Total: >3000 Total: >4000 Tele2 Own Shops • Franchising business model in all rebranded shops • Full range of products and services • Average GI increases by 15% • Higher ARPU, LTV and lower churn71 Tele2 Capital Markets Day 2012
  11. 11. Customer dataCUSTOMER SERVICE SATISFACTION OVERALLTop-3 on 10 point scale 89% 88% • Tele2’s own call centers 86% demonstrate highest customer 85% 85% satisfaction • Operational excellence based on COPC customer service standards • World-class service program across Russian regions Q311 Q411 Q112 Q212 Q312 TELE2 MTS Beeline Megafone72 Tele2 Capital Markets Day 2012 Source: Mobile Monitoring
  12. 12. Clear Business Goals Through Evolution Defender Challenger Newcomer Region’s position Market Share EBITDA No. of regions Targets Leader in the region  35% Retention, Defender 9 (avg. 46%) (avg. 47%) ARPU protection Challenger  20% < 35% Subscribers 21 (avg. 31%) (avg. 31%) acquisition, retention Newcomer < 20% Subscribers <0 8 (avg. 17%) acquisition73 Tele2 Capital Markets Day 2012
  13. 13. Old Regions: Sustainable Growth of ARPU and Subscriber Base Net Intake (‘000 Subs) Subscriber Base (‘000 Subs) +5% Q3’12600 20,000 vs Q3’11500 15,000400300 10,000200 5,000100 0 0 Annualized Churn ARPU (SEK) +3% Q3’12 vs Q3’1150%40% 5430%20% 4910% 0% 4474 Tele2 Capital Markets Day 2012
  14. 14. Old Regions: Solid Profitability ProfileRevenue (SEK ‘000) +8% Q3’12 EBITDA (SEK ‘000) and EBITDA % +3% Q3’12 vs Q3’11 vs Q3’11 3,000 1,400 60% 2,500 1,200 50% 2,000 1,000 40% 800 1,500 30% 600 1,000 20% 400 500 200 10% 0 0 0% Market share - Subscribers (Sept12) Tele2 59% 41% Rest of the market75 Tele2 Capital Markets Day 2012 Source: internal research, ACM data
  15. 15. New Regions: Considerable and SustainableGrowth Net Intake (‘000 Subs) Subscriber Base, (‘000 Subs) +22% Q3’12 vs Q3’11 1,000 8,000 800 6,000 600 4,000 400 200 2,000 0 0 +7% Q3’12 Annualized Churn ARPU (SEK) vs Q3’11 100% 50 80% 40 60% 30 40% 20 20% 10 0% 076 Tele2 Capital Markets Day 2012
  16. 16. New Regions: Solid Profitability Profile Revenue (SEK ‘000) +32% Q3’12 EBITDA (SEK ‘000) EBITDA % +78% Q3’12 vs Q3’11 vs Q3’11 1,000 200 35% 800 100 15% 600 0 -5% 400 -100 -25% 200 -200 -45% -300 -65% 0 Market share - Subscribers (Sept12) 24% Tele2 76% Rest of the market77 Tele2 Capital Markets Day 2012 Source: internal research, ACM data
  17. 17. Far East launch Launch Date Total Subs* Market Share Sakhalin 05.10.2012 21 133 2.7% Kamchatka 26.10.2012 13 798 2.5% Magadan 02.11.2012 6 079 2.4% Jewish Autonomous 09.11.2012 8 271 4.8% Oblast Field Connections Events with Invited Celebrities New Monobrand Shops78 Tele2 Capital Markets Day 2012 * As of 04.12.2012
  18. 18. Tele2 Russia Cost Efficiency Sales&Marketing costs / Revenue Customers per Employee150% Base level 2009 Tele2100% -15% Beeline50% Megafon 0% 2009 2010 2011 2012 MTS Sales & Marketing costs are 15% more efficient in 3 years 0% 20% 40% 60% 80% 100% 120% Administrative costs / Revenue150% Base level 2009 • Optimization of organization structures100% -37% • Legal & Tax structures optimizations50% • New opportunities 0% 2009 2010 2011 2012 • New sales channel development Administrative costs are 37% more efficient in 3 years 79 Tele2 Capital Markets Day 2012
  19. 19. Russia 2,768 employees Best-in-class employee engagement Yearly survey ”MyVoice” shows Employee engagement index record high engagement levels 60% and employee satisfaction 50% 40% 30% Tele2 RU 20% Global Benchmark 10% 0%80 Tele2 Capital Markets Day 2012
  20. 20. Current LTE allocations not fully available 1800 MHz offers great potential700/800 MHz LTE FDD 1800 MHz LTE LTE 2300 MHz LTE TDD GKRCh LTE TDD LTE TDD decision 2600 MHz LTE FDD required LTE FDD Deployed Limited Deployment 2012 LTE Tender Allocations 81 Tele2 Capital Markets Day 2012 Source: Russian business press publications
  21. 21. Global trends for LTE 1800/Technology Neutrality 130 LTE 1800 devices announced • LTE on 1800 MHz ensures the quickest start of 4G • Closes “digital gap” between cities and rural areas • Technology Neutrality is the most cost-effective way of launching 1 LTE 26 • 1800 MHz is the most widely used band for LTE deployments 29 LTE deployment 22 50 44 40 8 30 Phone Module Mobile Tablet 20 Router Dongles Femtocell 10 0 1900 MHz 900 MHz 850 MHz 2100 MHz 800 MHz AWS 700 MHz 2.6 GHz 1800 MHz b5 b2082 Tele2 Capital Markets Day 2012 Source: GSA
  22. 22. Global trends for LTE 1800/Technology Neutrality Tele2 succesfully Regulator requested tested LTE in 1800 MHz trial results in 3 regions June 1, 2013 Competitors asked Pending question for permission to is when to test LTE implement LTE83 Tele2 Capital Markets Day 2012
  23. 23. MNP – Mobile Number Portability MNP is expected to be implemented in Russia from December 1, 2013 There are varying estimates of potential MNP service user base on the Russian market The possible Mobile Number Portability introduction end of 2013-2014 may allow Tele2 to benefit from new customer inflow84 Tele2 Capital Markets Day 2012
  24. 24. Existing network supportSubscribers, mln 23 22 21 20 Significant growth of voice and data 2011 traffic continues and drives 19 18 2012 investments both in voice and data 17 capacity 16 Jan Feb Mar Apr May Jun Jul Aug Sep 18% annualData traffic, TB 40% annual Voice, mln minutes growth growth 6,000195175 5,500155 5,000135 2011 4,500115 2012 4,000 95 3,500 75 3,000 Jan Feb Mar Apr May Jun Jul Aug Sep Jan Feb Mar Apr May Jun Jul Aug Sep85 Tele2 Capital Markets Day 2012
  25. 25. Network capabilitiesTerritory coverage Population coverage 40% 96% 93% 94% 31% 31% 32% 32% 92% 93% 29% 30% 91% 92% 30% 27% 28% 92% 24% 25% 90% 90% 88% 87% 20% 86% 10% 84% 0% 80% 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Federal highways coverage*, % 89% 88% 88% 88% Tele2 continues to invest in 87% coverage improvement to 87% 86% increase quality perception 86% 85% Beeline MTS Megafon Tele2 * Source: ROSKOMNADZOR highways coverage measurements 01.10.2012 (for86 Tele2 Capital Markets Day 2012 TELE2 license territory)
  26. 26. LTE network readiness All network investments since 2009 are LTE compatible • 58% of base stations LTE ready • Transport network 67% LTE ready Tech Neutrality tested in 2 regions No impact on 2G service quality LTE data speed up to 80 Mbps87 Tele2 Capital Markets Day 2012
  27. 27. Summary • The fastest growing company on the Russian mobile market • Unique discounter positioning • Efficiency KPIs continuously superior to competition • Excellent user experience of 2G Voice and Data • Good progress towards Technology Neutrality88 Tele2 Capital Markets Day 2012
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