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Tele2 AB Q1 2011 presentation

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  • 1. FIRST QUARTER 2011April 19, 2011
  • 2. Agenda About Q1 2011 Financial review Guidance and Concluding remarks2 2010-10-20
  • 3. Highlights Q1 • Group – Total customer base amounting to more than 31 million customers. Net customer intake for the group 399,000 – Net sales grew by 0.5 percent. Currency-adjusted net sales grew by 7 percent, driven by mobile sales – EBITDA grew by 4 percent. Currency-adjusted EBITDA grew by 11 percent. EBITDA margin amounted to 26 (25) percent • Russia • Nordic • Central Europe & Eurasia • Western Europe3 2010-10-20
  • 4. Highlights Tele2 Russia • 547,000 (949,000) new customers in Q1 2011 • Net sales grew by 17 percent. Currency- adjusted net sales grew by 27 percentEBITDA 12M ROLLING CUSTOMER BASE SEK MILLION / PERCENT MILLIONS4000 37% 20 36% 193000 18 35%2000 34% 17 16 33%1000 15 32% 14 0 31% 13 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 12 EBITDA 12M rolling EBITDA-margin 12M rolling Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 4 2010-10-20
  • 5. Mobile market overview MOU AND ARPU PREPAID SHARE * MINUTES RUB PERCENT 250 250 96% 240 240 93,9% 230 230 92,8% 93% 92,5% 220 220 210 210 89,6% 89,8% 200 200 90% 190 190 180 180 87% Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 2006 2007 2008 2009 2010 MoU (left-hand side) RUB (right-hand side) NET ADDITIONS QUARTERLY CHURN TELE2 SHARE OF ADDS (%) PERCENT 15% 100% 80% 12% 60% 9% 40% 20% 6% 0% 3% -20% 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Jan 11 Feb 11 MTS Vimpelcom MegaFon Tele2Source: AC&M – 4Q10 Report, Analysis Mayson– Voice Quarterly Metrics, Dec 2010 *The dynamics is caused by the B2B segment5 2010-10-20 growth
  • 6. Mobile market overviewMOBILE MARKET SHARES MOBILE MARKET SHARESPERCENT OF ACTIVE SUBSCRIBERS PERCENT OF RETAIL REVENUES40% 35%35% 30%30% 25%25% 20%20% 15%15% 10%10%5% 5%0% 0% 2006 2007 2008 2009 1Q10 2Q10 3Q10 4Q10 2006 2007 2008 2009 1Q10 2Q10 3Q10 4Q10 Mobile TeleSystems VimpelCom MegaFon Tele 2 Mobile TeleSystems VimpelCom MegaFon Tele 2 Average TELE2 share (all Russia) – 8.4% Average TELE2 share (old regions) – 39% * Average TELE2 share (new regions) – 16% * Average TELE2 share (total 37) – 29% * * T2 Initial Measurement 2011 Source: AC&M Consulting – 4Q10 Report, Mayson Analysis – Voice Quarterly Metrics, Dec 20106 2010-10-20
  • 7. Mobile data market DATA REVENUE as of 4Q10 BIG4 DATA REVENUE BREAKDOWN SHARE OF TOTAL REVENUE (FEDERAL) PERCENT, 4Q10 (TELE2 REGIONS) MTS Vimpelcom MegaFon Tele2 17% 11% 28% MTS 9% 8% Megafon 7% Vimpelcom 21% Tele2 34% • EDGE enabled mobile network • Great price and smart packaging • Large difference between major cities vs. rural areas7 * Tele2 regions internal, BIG 3 – J’son & Partners, 2011, otherwise AC&M, 2010 2010-10-20
  • 8. Tele2’s regional expansion opportunities COVERAGE MAP Population (Million) Total Market 142 New licences 11.5 Tele2 61 Won licences 1 Combined 62 Moscow The results of the first GSM tender: Tele2 got licences in all 4 new regions in the first round8 2010-10-20
  • 9. Highlights Tele2 Sweden • Increased mobile revenue growth of 17 percent • 45,000 (29,000) postpaid customers added • Mobile EBITDA margin 30 (35) percent, due to a larger gross intake of smartphone customers and increased costs to JVs • 4G launched in eight major cities NET SALES SEK MILLION / PERCENT 2300 20,0% 2200 15,0% 2100 2000 10,0% 1900 5,0% 1800 1700 0,0% Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Mobile net sales Mobile YoY net sales growth9 2010-10-20
  • 10. Swedish telecom market trends FIXED VS. MOBILE PERSPECTIVE MOBILE CONNECTIONS SWEDEN SWE TELECOM REVENUES (%) PERCENT 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Fixed Mobile 2G 3G 4G MOBILE DATA TB USAGE (RESIDENTIAL) TERABYTE 140 000 120 000 100 000 Mobile data is increasing, 80 000 driven by smartphones and 60 000 40 000 mobile broadband 20 000 0 2010 2011 2012 2013 2014 2015 Sources: Parella Weinberg Partners , Analysys Mason, PTS10 2010-10-20
  • 11. Smartphones change the customers’ behaviour Tele2 customers’ demand for data solutions The Swedish mobile market is increasing rapidly SMARTPHONES vs. FEATURE PHONES SALES OF DATA PACKAGES SHARE OF TOTAL MARKET 100% 80% 60% 400% 40% 20% 0% 2009 2010 2011 2012 2013 2014 Smartphones Feature phones Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec POSTPAID RESIDENTIAL WITH CONTRACT PERCENT 95% More than 60 percent of Tele2’s prepaid 90% customers converting to postpaid 85% 80% change to a smartphone 75% 70% Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-1111 Sources: Analysys Mason 2010-10-20 Sources: Internal data
  • 12. Focused activities give results on postpaid ASPU Top 10 phone sales in Tele2 ASPU trend recovered Stores (Jan-Mar) 1 iPhone4 16 GB • Focused on attracting and retaining the right customers 2 iPhone4 32 GB • Continued the expansion of Tele2 stores 3 Sony Ericsson X10 Mini Pro • Increased sales of data packaging • Remade B2B product portfolio 4 Sony Ericsson X10 • Strengthened switching solution offer 5 HTC Desire 6 ZTE Blade 7 Sony Ericsson X8 8 Sony Ericsson X10 Mini In total, 9 out of 10 sold phones are 9 HTC Wildfire smartphones 10 HTC Desire HD12 2010-10-20
  • 13. The 4G roll-out continues 99% coverage 2010 2011 End of 201213 2010-10-20
  • 14. Highlights Tele2 Western Europe • The Netherlands - Strengthened the position in the business segment through the completion of the BBned acquisition • Germany - Continued strong EBITDA contribution of 33 percent in fixed telephony EBITDA 12M ROLLING SEK million • Austria 3000 - Continued good progress in 2500 2000 restructuring program leading to 1500 sequential improvement of EBITDA 1000 contribution 500 0 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Netherlands Austria Germany14 2010-10-20
  • 15. Licence Renewal / Frequency Auction Auction early 2012 Auction 2015 Auctioned 201015 2010-10-20
  • 16. Highlights Tele2 Baltic Region • Stabilizing economy leading to better operational environment - Low consumer confidence delaying improved spend on communication services • Investment in network capabilities, as demand for mobile broadband increases - Tele2 Estonia was awarded 4G licence NET INTAKE EBITDA - CAPEX THOUSANDS SEK MILLION 60 400 40 300 200 20 100 0 0-20 -100-40 -200 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Estonia Lithuania Latvia EBITDA CAPEX EBITDA - CAPEX16 2010-10-20
  • 17. Highlights Tele2 Croatia • Goal to deliver positive free cash flow 2H 2011 on track • Solid customer intake despite high seasonal churn • Tele2 launched 21 Mbps in its 3G network EBITDA NET INTAKE SEK MILLION THOUSANDS 20 90 10 80 70 0 60-10 50-20 40 30-30 20-40 10-50 0 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q1 10 Q2 10 Q3 10 Q4 10 Q1 1117 2010-10-20
  • 18. Highlights Tele2 in Kazakhstan • Preparing for launch in late April - Tele2 in Kazakhstan relaxed on commercial activities in Q1 2011, leading to lower net intake • Mobile network covering almost 70% of the population - 2G/3G enabled infrastructure • Focus on widening the distribution network throughout the country • Interconnect lowered as of 2011 with good support from NRA18 2010-10-20
  • 19. Agenda About Q1 2011 Financial review Guidance and Concluding remarks19 2010-10-20
  • 20. Q1 2011 group results SEK million Q1 11 Q1 10 Change % Net Sales 9 573 9 527 EBITDA 2 457 2 358 4% - EBITDA margin (%) 26% 25% Depreciation and Joint Ventures -897 -809 - Depreciation of Net sales (%) 9% 8% Mainly due to spectrum rebalancing in 900 MHz One-off items 99 -3 band EBIT 1 659 1 546 7% Normalized EBIT 1 560 1 549 - Normalized EBIT margin (%) 16% 16% Financial items -62 42 Taxes -371 -339 Net profit/loss 1 226 1 249 Net result, discontinued operations -13 19 Net result total operations 1 213 1 26820 2010-10-20
  • 21. Currency movements (vs. SEK) YoY Difference in YTD Ave FX Rates, 2011 vs. 2010 EUR -11.0% RUB -8.0% End of Quarter Spot rate vs. 31/12-2010 EUR -1% RUB -1% EUR/EUR pegged and RUB currencies approximately 2/3 of sales and EBITDA21 2010-10-20
  • 22. Currency adjusted Sales and EBITDACURRENCY ADJUSTED SALES, +7% CURRENCY ADJUSTED EBITDA TOTAL, +11 %SEK MILLION SEK MILLION10 000 3 000 9 000 0% 8% 2 500 8 000 -3% 2 000 17% 7 000 6 000 27% 1 500 43% 5 000 1 000 4 000 5% -6% 3 000 500 2 000 0 1 000 0 -500 Q1 10 Q1 11 Q1 10 Q1 11 Kazakhstan MA Nordic MA Russia Kazakhstan MA Nordic MA Russia MA Central Europe MA Western Europe MA Central Europe MA Western Europe 22 2010-10-20
  • 23. Taxes Taxes in income statement Q1 11 Q1 10 Normal -371 -339 One-Off - - Total -371 -339 Taxes in cash flow Q1 11 Q1 10 Normal -225 -233 Deferred tax assets amounted to SEK 3.1 (3.6) billion23 2010-10-20
  • 24. Cash flow for Q1 2011 SEK million Q1 11 Q1 10 OPERATING ACTIVITIES Cash flow from operations, before paid tax 2 589 2 341 Cash flow from operations, paid taxes -225 -233 Changes in working capital -310 183 Cash flow from operating activities 2 054 2 291 INVESTING ACTIVITIES CAPEX -933 -608 Cash flow after CAPEX 1 121 1 683 Acquisition and sale of shares and participations, net -14 -819 CASH FLOW AFTER INVESTING ACTIVITIES 1 107 864 Negative change in working capital affected by increased instalment sales of handsets and some other pre-payments24 2010-10-20
  • 25. Group financial profile NET DEBT INCL. JV / EBITDA 2010 SEK BILLION / RATIO 20 1,80 18 1,60 16 1,40 14 1,20 12 1,00 10 8 0,80 6 0,60 4 0,40 2 0,20 0 0,00 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Net debt incl. JV Pro forma incl. proposed May dividend Net debt incl. JV / EBITDA 201025 2010-10-20
  • 26. Bal. sheet consideration / Fin. leverage C When available, invest in value accretive M&A / New growth M&A or new business opportunities A opportunities meeting Tele2’s strict financial hurdles S H G E Shareholder Enhance shareholder value by distributing N recurring cash to shareholders remuneration E R A T I O Cash / Buffer Retain financial buffer N Prudent assessment based on (a) status of its operations, (b) future strategic opportunities, (c) competitive landscape and (d) general macro economic status26 2010-10-20
  • 27. Net debt and dividend targets Shareholder remuneration “Tele2 will seek to pay a progressive ordinary dividend of no less 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.”27 2010-10-20
  • 28. Group EBITDA, Sales and Capex GROUP EBITDA GROUP SALES SEK MILLION / PERCENT SEK MILLION3 000 30% 12 000 28% 10 0002 000 26% 8 0001 000 6 000 24% 0 22% 4 000 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 2 000 Mobile Fixed broadband 0 Fixed telephony Other Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Group EBITDA margin Mobile Fixed broadband Fixed telephony Other GROUP CAPEX ROCE SEK MILLION PERCENT1 400 25%1 2001 000 20% 800 15% 600 400 10% 200 0 5% Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 0% Mobile Fixed broadband Fixed telephony Other Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 28 2010-10-20
  • 29. Group mobile EBITDA GROUP MOBILE EBITDA SEK MILLION / PERCENT 2 500 40% 35% 2 000 30% 1 500 25% 20% 1 000 15% 10% 500 5% 0 0% Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Mobile EBITDA on own infrastructure Mobile EBITDA (MVNO) Mobile EBITDA margin on own infrastructure Total mobile EBITDA margin29 2010-10-20
  • 30. Sweden mobile revenue explained SWEDEN MOBILE REVENUE WATERFALL SEK MILLION 189 (+10%) 2237 (+17%) 129 (+7%) 1919 Revenue Q1 10 Underlying mobile Mobile equipment Revenue Q1 1130 2010-10-20
  • 31. Sweden mobile EBITDA explained SWEDEN MOBILE EBITDA WATERFALL SEK MILLION 112 22 -101 -28 664 669 EBITDA Q1 GM1 Other Expansion / SUNAB/N4M EBITDA Q1 10 Call center 1131 2010-10-20
  • 32. Agenda About Q1 2011 Financial review Guidance and Concluding remarks32 2010-10-20
  • 33. Tele2’s general group targets • 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 region33 2010-10-20
  • 34. Concluding remarks Russia 2011: Also an investment year • Strong customer intake and • Russia EBITDA contribution in market area Russia • Kazakhstan Nordic • Solid mobile revenue growth in • Sweden market area Nordic - 4G Western Europe • Further strengthening its position • Norway in the consumer and business segments - 3G Central Europe and Eurasia • Tele2 in Kazakhstan getting ready for commercial launch34 2010-10-20
  • 35. Q&A35 2010-10-20
  • 36. 36 2010-10-20

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