New York & Toronto Roadshow June 2010

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New York & Toronto Roadshow June 2010

  1. 1. NEW YORK & TORONTO ROADSHOW 28-30 June 2010
  2. 2. AGENDA Tele2 in Brief Market Area Update Financial review Fi i l i Concluding remarks 2
  3. 3. TELE2 MOBILE EASTERN EUROPEAN GROWTH MACHINE • 28 million customers in 11 countries • We have grown our mobile footprint, today covering more than 100 million people with controlled li illi l ith t ll d licenses Mobile Fixed broadband Fixed telephony Other operations 6% 15% 17% 62% Percentage of sales, 2009 3
  4. 4. TELE2 FOOTPRINT RUSSIA Mobile SWEDEN Full product suite NORWAY Mobile, Fixed telephone ESTONIA Mobile, Fixed telephone LATVIA Mobile, Fixed telephone M bil Fi d t l h LITHUANIA Full product suite NETHERLANDS Full product suite GERMANY Fixed broadband, fixed telephony KAZAKHSTAN Mobile AUSTRIA Croatia Fixed broadband, Mobile fixed telephony 4
  5. 5. TELE2 ALWAYS PROVIDES THE • P i l d hi Price leadership through best in class cost control • Price winning g quality network • Standardized product portfolio 5
  6. 6. AGENDA Tele2 in Brief Market Area Update Financial review Fi i l i Concluding remarks 6
  7. 7. MARKET AREA NORDICS Mobile • 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 Norway Market strategy • Further develop and calibrate our increased focus on mobile postpaid segment 7
  8. 8. SHIFT TOWARDS SMART PHONES Smartphones 2010 Smartphones 2008 LOW HIGH ARP ARPU U Tele2/Comviq target segment • 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 predict that it will drop further down to 20% in 2015 8
  9. 9. MARKET AREA RUSSIA Mobile • 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 regions i • Focus on customer intake in the new regions i 9
  10. 10. RUSSIAN TELECOM MARKET Player License Cover, # Regions May 2010 MTS 82 regions 69 845 174 g MegaFon 83 regions g 52 665 805 Vimpelcom 80 regions 50 950 904 TELE2 37 regions 16 102 000 *Source: ACM 10
  11. 11. MOBILE SUBSCRIBER PENETRATION Penetration levels in Tele2 licensed areas • Market penetration: 146%* • Active SIM penetration: 95%** • Estimated human penetration: 82%*** * & ** Source: ACM* and internal TELE2 research** 11
  12. 12. TELE2 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
  13. 13. HIGHLIGHTS TELE2 RUSSIA Net Intake - New regions Net Intake - Old regions EBITDA margin 1400 38% 36% 1200 34% 1000 32% nds) 800 (In thousan 30% 600 28% 26% ( 400 24% 200 22% 0 20% Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 13
  14. 14. CLEAR BUSINESS GOALS THROUGH EVOLUTION Perceived pric leadership Subscriber base Defender 17 REGIONS Challenger Retention ARPU protection p/ Subscribers acquisition Newcomer ARPU protection Retention ce Subscribers acquisition S b ib i iti 20 REGIONS P 1,5 – 2 years 2,5 – 3 years >3 years 14
  15. 15. TELE2 RUSSIA – OLD REGIONS 15
  16. 16. TELE2 IS NUMBER ONE IN 14 OF 17 OLD REGIONS Tele2 share Beeline Share MTS Share Megafon Share Other Share 40% rket share in existing regions, %. % 37% 35% 30% 25% 21% 21% 20% 18% i 15% 10% 3% 5% Mar 0% Source: Internal Tele2 research As of January 2010 16
  17. 17. TELE2 RUSSIA NEW REGIONS KALININGRAD PETROZAVODSK PSKOV TVER NARYAN-MAR VOLOGDA BRYANSK KALUGA KOSTROMA OREL TULA VLADIMIR RYAZAN KIROV TAMBOV KRASNODAR TURA ADYGEI TOMSK NOVOSIBIRSK 17
  18. 18. MARKET AREA CENTRAL EUROPE AND EURASIA Mobile • Defend market share and expand when possible • First signs of economic recovery in the Baltic states Market strategy • Economic turmoil creates opportunities for a price leader in the Baltic states • Reach break even in Croatia 2H 2010 18
  19. 19. HIGHLIGHTS TELE2 BALTIC REGION EBITDA CAPEX EBITDA - CAPEX 500 400 300 lion) 200 (SEK mill 100 0 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 -100 -200 19
  20. 20. KAZAKHSTAN • Market entrance in line with expansion strategy in Eurasia • New CEO in place • Operate under the brand name NEO nder - Re-launch H2 2010 • Network roll-out 20
  21. 21. MARKET AREA WESTERN EUROPE Corporate segment p g • Gold standard for the group in the Netherlands Market strategy • Investing for the future in the Netherlands g • Further restructuring in Austria • Cash flow focus in Germany y 21
  22. 22. AGENDA Tele2 in Brief Market Area Update Financial review Fi i l i Concluding remarks 22
  23. 23. Q1 2010 GROUP RESULTS SEK 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% 24 7% 22,8% 22 8% Depreciation and joint venture -809 -893 - Depreciation of net sales (%) 8,5% 9,1% One-off items O ff it -3 -4 EBIT 1,549 1,351 Normalized EBIT 1,546 1,347 - Normalized EBIT margin (%) 16,2% 13,7% Financial items 42 -592 Taxes 339 -339 -281 281 Net result, continuing operations 1,249 474 Net result, discontinued operations 19 197 Net result 1,268 1 268 671 23
  24. 24. CASH FLOW FOR Q1 2010 SEK million Q1 10 Q1 09 OPERATING ACTIVITIES Cash flow from operations, less paid taxes 2,341 1,923 Taxes paid -233 -456 Changes in working capital 183 364 CASH FLOW FROM OPERATING ACTIVITIES 2,291 1,831 INVESTING ACTIVITIES CAPEX -608 -1,149 Cash Flow after CAPEX 1,683 682 Acquisition and sale of shares and participations, net -819 -97 864 585 24
  25. 25. ROCE 20% 19% 18% 17% 16% 15% 14% 13% 12% 11% 10% 9% 8% 7% 6% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2007 2008 2009 2010 25
  26. 26. GROUP FINANCIAL PROFILE Net debt Net debt incl JV incl. Net debt/ EBITDA 2009 Net debt incl. JV/ EBITDA 2009 25 000 2,5 20 000 2 on) SEK millio 15 000 1,5 10 000 1 (S 5 000 0,5 0 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 07 07 07 08 08 08 08 09 09 09 09 10 26
  27. 27. TELE2 GOING FORWARD • B t Deal position Best D l iti – Perceived price leader – Expected quality • Targeting a long term mobile EBITDA margin on own infrastructure at least 35 percent p • 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 27
  28. 28. SWEDEN OUTLOOK • Tele2 will continue to target the p p g postpaid segment, which in the longer g , g term will lead to: – Increased ARPU – Lower churn • In the short term, this strategy will lead to higher total acquisition costs , gy g q resulting in: – A full year EBITDA margin in the range of 33-35 percent depending on customer intake 28
  29. 29. RUSSIA OUTLOOK • Subscriber base should be able to reach 19-20 million by YE 2011 y • Maintain ARPU growth at 5 percent by 2011 • EBITDA 2010-2011 – Old regions’ EBITDA margin should stabilize at 45 percent regions – 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 million 800 – Russia’s total EBITDA margin should develop in the range of 27-32 percent • Capex 2010-2011 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 conditions 29
  30. 30. CROATIA OUTLOOK ”WE WILL REACH EBITDA BREAK EVEN DURING 2H 2010” 30
  31. 31. NET 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” accordingly 31
  32. 32. AGENDA Tele2 in Brief About Q1 2010 Russian f R i focus Financial review Concluding remarks 32
  33. 33. CONCLUDING REMARKS Nordic N di 2010 an i investment year t t • Continued revenue growth • Russia Russia • Kazakhstan • Record high EBITDA • 4G Sweden Central Europe and Eurasia • 3G Norway • Stable cash flow contribution Western Europe • Solid operational performance 33
  34. 34. MATS GRANRYD Appointed President and CEO of Tele2 • Excellent understanding of emerging markets, technologies and consumer implementation Background • 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) • Vice President Ericsson S d (1997 - 2001) Vi P id t E i Sweden • 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
  35. 35. APPENDIX 35
  36. 36. TAXES Taxes in income statement (MSEK) One-Off Normal Reported Q1 - -339 -339 Taxes in cash flow statement (MSEK) One-Off Normal Reported Q1 - -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
  37. 37. GROUP NET INTAKE PER SEGMENT Mobile M bil Fixed broadband Fi d b db d Fixed telephony Fi d t l h 1 400 1 200 1 000 (In thousands) 800 600 400 200 0 -200 200 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 -400 37
  38. 38. GROUP CUSTOMER STOCK Group Customer Stock Group Mobile Customer Stock Mobile Fixed Broadband Fixed Telephony Prepaid voice Postpaid voice Mobile Internet 25 000 30 000 25 000 20 000 (In thousands) ) (I thousands) 20 000 15 000 15 000 10 000 10 000 In ( 5 000 5 000 0 0 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 • Strong intake in the mobile segment – Driven by Russia adding 949 000 new customers 38
  39. 39. GROUP EBITDA Mobile Fixed broadband Fixed telephony p y Other Group EBITDA margin 3 000 26% 2 500 2 000 on) 24% % SEK millio 1 500 1 000 22% (S 500 0 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 -500 20% 39
  40. 40. GROUP MOBILE EBITDA Mobile EBITDA on own infrastructure Mobile EBITDA (MVNO) Mobile EBITDA margin on own infratsructure Total mobile EBITDA margin 1 800 34% 1 750 1 700 32% 1 650 n) 30% (SEK million 1 600 28% 1 550 1 500 26% 1 450 24% 1 400 1 350 22% 1 300 20% Q4 Q 08 Q1 Q 09 Q2 Q 09 Q3 Q 09 Q4 Q 09 Q1 Q 10 40
  41. 41. MoU AND ARPU DEVELOPMENT Sweden Russia 60 240 220 260 240 50 220 200 SEK SEK 220 S 180 40 200 200 160 180 30 180 Q Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q Q Q Q Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 ARPU MoU ARPU MoU • Relatively stable development – Swedish ARPU being diluted by an increasing customer base in Mobile Internet and g y g softness in corporate customer MoU 41
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