Tele2 AB - Presentation on Citigroup TMT conference 20120320
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Tele2 AB - Presentation on Citigroup TMT conference 20120320

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  • Tele2 NL is an established playerTele2 NL already operates as a full MVNO, with National Roaming on T-MobileTele2 NL is a well established player in the Consumer, Business and Wholesale segments. We believe we can up- and cross-sell converged offerings to our baseUncertainty of October 2012 auctionWe need to acquire competitive spectrum portfolio, both in high & low frequenciesLicense cost: auction reserve prices (29-35 mEUR for 2x5 MHz < 1 GHz) will most likely lead to significant spectrum pricesSecuring network sharing is crucial: a significant portion of CAPEX and OPEX can be shared, network partner being pursued but to be secured
  • K-cell – 51% stake owned by TeliaSonera and 49% by KazakhtelecomThe second largest GSM operator on the market is Beeline with main stakeholder VimpelCom groupKazakhtelecom owns 100% stake in CDMA operator Altel (Dalacom, Pathword)In December 2011 Kazakhtelecom announced that it will sell its stake in K-Cell to the major stakeholder TeliaSonerain 1Q12.

Tele2 AB - Presentation on Citigroup TMT conference 20120320 Tele2 AB - Presentation on Citigroup TMT conference 20120320 Presentation Transcript

  • TELE2 COMPANYOVERVIEW20 March 2012
  • Tele2 offers cutting edge telecom products and services Challenger telecom operator offering mobile and fixed telephony and broadband and related services Front row player within new technology 4G Broad range of products and services to residential and business customers2
  • Tele2‟s has 34 million customers in 11 national markets Tele2 Group Financials Sales 2011: SEK 40.8 bn EBITDA 2011: SEK 10.9 bn Sales Q4 2011: SEK 10.8 bn Market areas EBITDA Q4 2011: Tele2 Nordic: Sweden and Norway SEK 2.9 bn Tele2 Western Europe: Netherlands, Germany and Austria Tele2 Russia: Russia Number of customers: Tele2 Central Europe & Eurasia: 34 million Estonia, Latvia, Lithuania, Croatia, Kazakhstan3
  • Market Area Russia: Overview Population Appr. 140 million Tele2 Russia  43 regions of Russian Federation  20.6 million subscribers  Mobile operator #4 in Russia in terms of subscribers and revenue Represents 28% of total net sales Q4 2011 Focus  Continue grow customer base and maximize the 2G opportunity  Ensure that newcomer and challenger regions reach the same operational trends as defender regions  Evaluate possibilities to expand carefully through new licenses as well as by complementary acquisitions4
  • Q4 Highlights Russia Region’s position Market share EBITDA Defender (10 regions) Leader in the region 35% Moscow (avg. 46%) (avg. 52%) Challenger (17 regions) 20% < 35% (avg. 31%) (avg. 31%) Newcomer (16 regions) < 20% ≥0 (avg. 17%)EBITDA and NET SALES and CUSTOMER BASE andEBITDA MARGIN YoY NET SALES GROWTH CUSTOMER INTAKESEK Million SEK Million Thousands Thousands 1,600 60% 3,200 30% 21,000 800 1,200 45% 2,800 23% 20,000 600 800 30% 2,400 15% 19,000 400 400 15% 18,000 200 2,000 8% 0 0% 17,000 0 1,600 0% Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 EBITDA (left) Net sales (left) Customer base (left) 5 EBITDA margin (right) YoY net sales Customer net growth (right) intake (right)
  • The Russian mobile marketTELE2 SUBSCRIBERS AS PART OF TOTAL Tele2 MOBILE SUBSCRIBERS AND PENETRATIONRUSSIAN MOBILE MARKET Million subscribers Million subscribers Subs Penetration (%) 9.1% 250 250 180% 5.6% 200 200 160% 150 150 140% 100 100 120% 50 50 100% Q1 09 09 09 09 10 10 10 10 11 11 11 11 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 06 07 08 09 10 11 12F 13F 14F 15FNET ADDITIONS Tele2 MegaFon Thousands of subscribers Vimpelcom MTS8,0006,0004,000 During 2011, Tele2 has gained2,000 market share 0-2,000 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 09 09 09 10 10 10 10 11 11 11 116
  • Revenue source development TELE2 RUSSIA: REVENUE SPLIT Q4 8,1% VAS revenue (%) (excl. Data) 12,1% Tele2 VAS and data revenue share Voice revenue (%) of total revenue is growing and is Data revenue (%) comparable to market level 80% BIG4 IN TELE2 REGIONS ARPU DEVELOPMENT DATA REVENUE BREAKDOWN, % RUB 400 15% 15% 300 21% 20% 224 200 30% 29% 100 34% 35% 0 2006 2007 2008 2009 2010 Q1 11 Q2 11 Q3 11 Q4 11 Tele2 MegaFon Vimpelcom MTS Q3 Q47
  • Regulatory update: Tele2 Russia • On 12 March it was announced that Roscomnadzor issued the radio frequency permission to NIIR* to deploy LTE trial on Tele2 network • The permission is valid until 31 March which is sufficient for NIIR to complete the trial according to the approved methodology • NIIR is expected to issue the trial results report by the end of April and it is likely to be submitted for the Q2 2012 GKRCh meeting for the decision on TN to be made * State-owned Science and Research Institute8
  • Market Area Nordic: Overview Population 14.4 million Tele2 Sweden and Tele2 Norway Home market and test bed for new services Represents 42% of total net sales Q4 2011 Sweden 30%; Norway 12% Focus  Sweden: Build on mobile growth and 4G roll-out coupled with household/ corporate fiber strategy  Norway: Integration of Network Norway and migration of customers to Tele2‟s own network9
  • Smartphone market development SMARTPHONE INSTALLED BASE* 100% 80% Sales of top ten mobile phones 60% Tele2 Sweden (FY 2011) 40% 20% 1. iPhone 4 16GB 0% 2. iPhone 4S 16GB 1106 1107 1108 1109 1110 1111 1112 Regular handset Smartphone 3. Samsung Galaxy S2 4. iPhone 4 32GB SMARTPHONE PRICE CATEGORIES 5. ZTE Blade 100% 6. Sony Ericsson Cedar 90% 80% 7. iPhone 4 8GB 70% 8. Samsung Galaxy Gio 60% 9. Sony Ericsson Xperia Arc 50% 10. Samsung Galaxy ACE Q4 2010 Q4 2011 High end Mid Low end * Postpaid residential, quantity of handsets10
  • Growth in sales of data packages DATA PACKAGE CUSTOMER STOCK 2011 MOBILE SURF PACKAGES Subscribers 600,000 500,000 400,000 300,000 Base Small 200,000 100,000 0 Jan Feb Mar Apr May Jun Maj Jul Aug Sep Oct Nov Dec Okt Nov Dec Medium Large Data package customer stock increased by 120% during 201111
  • Recent happenings12
  • Tele2 Norway organisation • After Tele2 Sweden AB acquired Network Norway in October 2011, Tele2s Norwegian operations have consolidated its position as the third largest player in the Norwegian mobile market with over 1.1 million customers • Tele2 in Norway is building the countrys third mobile network which currently has 45 percent population coverage Parent company Tele2 Sverige AB Subsidiary companies Tele2 Network Norge AS Norway AS Brands OneCall Network13
  • Tele2 Norway integration update • An effective overall integration process has resulted in an optimal organisational structure for Tele2 Norway in place mid October 2011 • Headcount integration synergies of 14% • Strong joint operations established with full focus to obtain the #2 market position from NetCom (TeliaSonera)14
  • Market Area Western Europe: Overview Population 106 million Leading the group in business to business services and consumer fixed broadband Represents 19% of total net sales Q4 2011 Netherlands 13.4%; Germany 2.5%; Austria 3.1% Focus  Netherlands Grow in mobile and SME  Austria B2B & Integration of Silver Server  Germany Grow Fixed Via Mobile product15
  • Dutch mobile market attractiveness • Dutch government favours competition and newcomers - 2010: MNOs „capped‟ in 2.6 GHz auction - 2012: specific „newcomer reservation‟ in 800 and 900 MHz bands for non-MNOs in 800/900/1800 auction October 2012 • Adoption of mobile broadband in the Netherlands is amongst the lowest in Europe, prices amongst the highest This will be the main growth opportunity for 4G enabling disruptive offers by a newcomer • Differentiation We believe we can offer a truly distinct mobile broadband experience, enabled by LTE as a technology „step change‟ (Dutch market standard is HSPA ≤14.4 MBps)16
  • Tele2 NL becoming an MNO PROS CONS • Tele2 Group holds experience as • Uncertainty of October 2012 a mobile (LTE) operator auction • Tele2 NL is an established player • Securing network sharing is crucial • Tele2 NL has an own nationwide fiber backbone Becoming MNO is a viable long term growth option for Tele2 Netherlands, and it will also facilitate seamless, converged offerings17
  • Market Area Central Europe and Eurasia: Overview Population 28 million Represents 12% of total net sales Q4 2011 Estonia 2%; Latvia 3%; Lithuania 3%; Croatia 3%; Kazakhstan 1% Focus  Stability and improvements in Baltics  Growth in revenue, profits and market share in Croatia  Establish Tele2 in all regions and continue to grow rapidly in Kazakhstan18
  • Kazakhstan mobile market overview MARKET CHARACTERISTICS TELE2 • Prepaid market dominated by two • The first real discounter on the GSM operators market • Strong growth of the mobile • Tele2 brand; Launch of region by penetration during the last years region to offer the best price and take into consideration the region • High transmission prices, the specifics and good coverage main player incumbent Kazakhtelecom • After Tele2 entered the market the competition level increased • Relatively low MoU (around 100 significantly • The average price offered to new min.) compared to neighboring customers in Almaty has been reduced countries almost two times. Similar development in other regions of Kazakhstan • A discount sub brand has been launched • High interconnect rates by a competitor to defend its customer base19 2010-10-20
  • Tele2 Kazakhstan organisation overview Tele2 AB Asianet Holding 51% 49% Tele2 KZ Frequency band Channel Technology 900 11 MHz GSM/UMTS 1800 5 MHz GSM 2100 20 MHz UMTS20 2010-10-20
  • Kazakhstan mobile market division CUSTOMER MARKET SHARE 2011 SHARE OF NET GROWTH 2011 4.3% 6.4% 7% 22% 50.3% 39.0% 40% 32% The market is dominated by two GSM Tele2 took a major part of the net growth operators sharing almost 90% of in the Kazakh telecom market in 2011 customer and revenue market share21 2010-10-20
  • Tele2 Kazakhstan launch status 1,500,000 300,000 City Launch Region 250,000 1,200,000 population 200,000 Shymkent March 2012 2 600 000 900,000 150,000 100,000 Taraz March 2012 1 000 000 600,000 50,000 Kyzyl-Orda April 2012 700 000 300,000 0 Atyrau April 2012 500 000 0 -50,000 Jan Feb Mar Apr Maj Jun Jul Aug Sep Okt Nov Dec Customer base (left) Customer net intake (right)22
  • Bal. sheet consideration / Fin. leverage When available, invest in value accretive M&A or C M&A / New growth new business opportunities meeting Tele2‟s A opportunities strict financial hurdles S H G E Shareholder Enhance shareholder value by distributing N recurring cash to shareholders E remuneration R A T I O Retain financial buffer N Cash / Buffer Prudent assessment based on (a) status of operations, (b) future strategic opportunities, (c) competitive landscape and (d) general macroeconomic status23 2010-10-20
  • Net debt and dividend targets Shareholder remuneration “Tele2 will seek to pay a progressive ordinary dividend of no less than 50 percent of net income excluding one-off items. Extraordinary dividends and the authority to purchase Tele2‟s own shares will be recommended or sought when the anticipated total return to shareholders is deemed to be greater than the achievable returns from the deployment of the capital within the groups operating segments or the acquisition of assets within Tele2‟s economic requirements.” Balance sheet “Tele2 has a target net debt to EBITDA ratio of between 1.25 and 1.75 times over the medium term. The company‟s longer term financial leverage should be in line with the industry and the markets in which it operates and reflect the status of its operations, future strategic opportunities and contingent liabilities.”24 2010-10-20
  • Sources of funding Q4 2011 Revolving credit facility Russia bond Other financing Off BS items In 2012, Tele2 AB strives to diversify its sources of funding further25
  • Concluding remarks • Create a strong network based operator in Norway • Start exploiting 4G services in Sweden • Evaluate MNO opportunities in the Netherlands • Complete the launch of mobile services in all regions in Kazakhstan • Launch 6 new regions in Far East of Russia26
  • Appendix27
  • Group results SEK million Q4 11 Q4 10 % YTD 11 YTD 10 % Net sales 10,839 10,109 7.2% 40,750 40,164 1.5% EBITDA 2,791 2,488 12.2% 10,852 10,284 5.5% - EBITDA margin (%) 25.7% 24.6% 26.6% 26.0% Depr. and joint ventures -1,125 -975 -3,880 -3,580 - Depr. of Net sales (%) 10.4% 9.7% 9.6% 9.0% One-off items -26 -157 -4 384 EBIT 1,640 1 ,56 20.9% 6,968 7,088 -1.7% Normalized EBIT 1,666 1,513 6,972 6,704 - Normalized EBIT margin (%) 15.4% 15.0% 17.1% 16.9% Financial items -60 -155 -599 -353 Taxes -269 -102 -1 465 -254 Net profit/loss 1,311 1,099 4,904 6,481 Discont. operations 0 404 -7 447 NET RESULT 1,311 1,503 4,897 6,92828
  • Currency movements (vs. SEK) YoY difference in YTD average End of Q4 spot rate FX rates, 2011 vs. 2010 vs. 31/12-2010 EUR -5.6 % EUR -0.6 % RUB -7.3 % RUB -3.6 % EUR/EUR pegged and RUB currencies represent 56% of external sales and 74% of EBITDA29
  • Currency-adjusted sales and EBITDA CURRENCY-ADJUSTED SALES CURRENCY-ADJUSTED SALES (FY) SEK Million SEK Million 45,000 15,000 36,000 + 7% 12,000 + 8% 27,000 9,000 6,000 18,000 3,000 9,000 0 0 Q4 10 Q4 11 YTD 10 YTD 11 CURRENCY-ADJUSTED EBITDA CURRENCY-ADJUSTED EBITDA (FY) SEK Million SEK Million 3,000 12,000 2,500 10,000 +13% +10% 2,000 8,000 1,500 6,000 1,000 4,000 2,000 500 0 0 YTD 10 YTD 11 Q4 10 Q4 1130
  • Taxes Taxes in income statement (MSEK) Q4 11 Q4 10 YTD 11 YTD 10 Normal -377 -277 -1 573 -1 405 One-Off 108 175 108 1 151 Total -269 -102 -1 465 -254 Taxes in cash flow statement (MSEK) Q4 11 Q4 10 YTD 11 YTD 10 Normal -163 -160 -948 -740 One-Off - - - - Total -163 -160 -948 -740 Deferred tax assets at year end amounted to SEK 2.9 (3.2) billion31
  • Cash flow Cash flow (SEK million) Q4 11 Q4 10 YTD 11 YTD 10 OPERATING ACTIVITIES Before paid tax 2,584 2,311 10,610 10,450 Paid taxes -163 -160 -948 -740 Changes in working capital -106 -374 -414 -100 CF from operating activities 2,315 1,777 9,248 9,610 INVESTING ACTIVITIES CapEX -1,400 -1,163 -4,667 -3,603 CF after CapEX 915 614 4,581 6,007 Shares and participations -1,541 - 469 -1,217 -1,51032
  • Debt position and ratio PRO FORMA NET DEBT / EBITDA 12’M ROLLING SEK Billion 20.0 2.00 17.5 1.75 Upper limit 15.0 1.50 12.5 1.25 Lower limit 10.0 1.00 7.5 0.75 5.0 0.50 2.5 0.25 0.0 0.00 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Pro Forma Net Debt Ordinary dividend Upper limit Pro Forma Net Debt / EBITDA 12‟M Rolling Extraordinary dividend Lower limit33
  • Debt profile SOURCES OF FUNDING SEK Billion 20.0 17.5 15.0 12.9 12.6 12.5 11.3 10.0 7.5 5.0 2.8 2.5 1.7 0.0 -2.5 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 -5.0 Revolving credit facility Russia bond Other bank loans Off BS items Cash Pro forma net debt34
  • Bal. sheet consideration / Fin. leverage When available, invest in value accretive M&A or C M&A / New growth new business opportunities meeting Tele2‟s A opportunities strict financial hurdles S H G E Shareholder Enhance shareholder value by distributing N recurring cash to shareholders E remuneration R A T I O Retain financial buffer N Cash / Buffer Prudent assessment based on (a) status of operations, (b) future strategic opportunities, (c) competitive landscape and (d) general macroeconomic status35
  • Net debt and dividend targets Shareholder remuneration “Tele2 will seek to pay a progressive ordinary dividend of no less than 50 percent of net income excluding one-off items. Extraordinary dividends and the authority to purchase Tele2‟s own shares will be recommended or sought when the anticipated total return to shareholders is deemed to be greater than the achievable returns from the deployment of the capital within the groups operating segments or the acquisition of assets within Tele2‟s economic requirements.” Balance sheet “Tele2 has a target net debt to EBITDA ratio of between 1.25 and 1.75 times over the medium term. The company‟s longer term financial leverage should be in line with the industry and the markets in which it operates and reflect the status of its operations, future strategic opportunities and contingent liabilities.”36
  • Mobile Fixed broadband Fixed telephony Other Group financials GROUP EBITDA and GROUP NET SALES GROUP EBITDA MARGIN SEK Million SEK Million 3,500 30% 12,000 3,000 10,000 28% 2,500 8,000 2,000 26% 6,000 1,500 24% 1,000 4,000 22% 500 2,000 0 20% 0 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Group EBITDA margin GROUP CAPEX (BS) ROCE SEK Million Percent 25% 1,600 23% 1,400 20% 22% 19% 1,200 20% 19% 1,000 15% 800 10% 600 400 5% 200 0 0% Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q4 10 Q1 11 Q2 11 Q3 11 Q4 1137
  • Group mobile EBITDA GROUP MOBILE EBITDA SEK Million 2,500 35% 2,000 28% 1,500 21% 1,000 14% 500 7% 0 0% Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 -500 -7% Mobile EBITDA on own infrastructure Mobile EBITDA (MVNO)* Mobile EBITDA margin on own infrastructure Total mobile EBITDA margin * Norway, Netherlands and Germany are treated as MVNO38
  • Income statement/Adjustment 2011 using new accounting principles SEK million 2011, Full year CONTINUING OPERATIONS Net sales 251 Operating expenses -215 Results from shares in associated companies and JVs -16 Other operating income 62 Operating profit, EBIT 82 Interest income/costs -75 Profit after financial items, EBT 7 Tax on profit -7 NET PROFIT - EBITDA Mobile Sweden 318 +2.7% Total Assets 355 Return On Capital Employed -0.4%39
  • Sweden mobile revenue and EBITDA (Q) SALES EBITDA SEK million SEK million 2,241 10 149 9 2,409 36% 1% 670 22 -32 51 5 716 EBITDA GM2 N4M Expansion Other EBITDA Ext. revenue Recurring Mobile Ass. comp & Ext. revenue Q4 2010 (excl. cost OpEx Q4 2011 Q4 2010 sales equipment adjustments Q4 2011 N4M)40
  • Sweden mobile revenue and EBITDA (FY) SALES EBITDA SEK million SEK million 8,474 311 609 -72 9,322 87% 4% 2,803 253 -68 -46 -100 2,842 Ext. revenue Recurring Mobile Ass. comp & Ext. revenue EBITDA GM2 N4M Expansion Other EBITDA YTD 2010 sales equipment adjustments YTD 2011 YTD 2010 (excl. cost OpEx YTD 2011 N4M)41
  • Swe mobile: Restated JV accounting SALES (Quarterly comparison) SALES (FY comparison) SEK million SEK million 8,474 303 8,776 -119 34 609 227 9,528 2,241 57 2,298 -33 16 149 12 2,441 EBITDA and EBITDA margin EBITDA and EBITDA margin SEK million SEK million 2,803 333 3,137 -57 -45 0 126 3,161 670 73 743 -16 -26 0 97 799 2% 0% -1% -2% 4% 30% 32% 33% 33% 3% 36% 0% % -1% -2,3% 0,5% -0,9 -2% 33% 1% Equipment MTR N4M Restated EBITDA Q4 Restated EBITDA Q4 Restatement Q4 2010 Underlying Restatement MTR N4M Equipment YTD 2010 EBITDA YTD 10 EBITDA YTD 11 Underlying Restated Restated 10 1142
  • 43 2010-10-20
  • Tele2 Norway history 1995 2000 2002 2007 2008 2009 2010 2011 Norway mobile Norway operations launched ADSL and fixed MVNO New MNVO Acquisition and strong organic VoIP operation at contract with of Network growth initiated. operations s Telenor NetCom Norway Service Provider at divested launched Telenor. Acquisition of Rapid Norway Lebara and turnaround, increa operations OneCall and sing profits while launched strong organic maintaning strong growth initiated growth Founded by Network roll-out Tele2 and phase 1 fully Network financed Norway44 2010-10-20
  • Tele2 Norway brand overview Revenue market share: 8.3 %* 1.5 %* • Position: Best deal challenger to Telenor and NetCom • Position: Best deal in the business segment • Segment: Residential/postpaid/prepaid: high, medium and low-end • Segment: Business/postpaid: high, medium and low-end customers customers • Products: Mobile voice, mobile broadband and Mobile Centrex • Products: Mobile voice, mobile broadband and fixed telephony • Price perception: Low • Price perception: Low • Quality perception: Medium (NwN) / Low (Tele2) • Quality perception: Medium • Channels: Retail, TM (Tele2) • Channels: Web, retail, TM and Customer Service • Revenue (Q4 2011): MNOK 116 • Revenue (Full year 2011): MNOK 2 311 • Subscribers (End of 2011): 82 000 • Subscribers (End of 2011): 592 000 2.7 %* 2.6 %* • Position: Price position in the general market • Position: Market leader with price position within the ethnic segment • Segment: Residential/postpaid: basic services customers • Segment: Residential/prepaid/postpaid: ethnic segment and • Products: Mobile voice and mobile broadband international calls • Price perception: Low • Products: Mobile voice • Quality perception: Medium • Price perception: Low • Channels: Web • Quality perception: Low/Medium • Revenue (Q4 2011): MNOK 229 • Channels: Retail, web and canvas • Subscribers (End of 2011): 261 000 • Revenue (Q4 2011): MNOK 136 • Subscribers (End of 2011): 222 000* Total market share revenue according to ”Det norske markedet for elektroniske kommunikasjonstjenster 1. halvår 2011, Post og Teletilsynet, 2011-11-14”. Please notethat Network Norway and OneCall have a combined market revenue share of 4.2 % (market share excludes Tele2 Business which is included in Tele2‟s market share of8.3 %). Network Norway‟s and OneCall‟s combined market revenue share has been divided (1.5 % and 2.7 %) in relation to total revenue reported for 1st half of 2011 for45respective 2010-10-20 company.