CITI European & Emerging     E ropeanMarkets Telecoms ConferenceMats GranrydCEOMarch 22, 2011
Agenda      g     Tele2 in brief     Q4 2010 summary     Exploiting     E l iti growth opportunities i R                 t...
Tele2 – An Eastern European growth machine    • SEK 40 billion in      revenue       •   Of which 70 percent mobile    • 3...
Q4 2010 summary3
Highlights Q4 2010       g g     Group:         – Net customer intake for the group 803,000 in Q4 2010         – Net sales...
Highlights Tele2 Russia       g g     • 755,000 (1,149,000) new       customers in Q4 2010     • Revenue grew by 24 percen...
Highlights Tele2 Sweden       g g     •     Increased mobile revenue growth of 12 percent     •     Adding 20,000 (20,000)...
Tele2 Netherlands: Revenues, segments &                                        g         focus areas                      ...
Highlights Tele2 Kazakhstan       g g     • During the quarter Tele2 added 114 000                  quarter,            11...
Group financial profile99   2010-10-20
Net debt and dividend targets                               g      •      Shareholder remuneration              – “Tele2 w...
Tele2’s general g              g       group targets                               g      •      Best D l             B t ...
Exploiting growth     opportunities in Russia12
Macro outlook      Consumer & Labor Market Indices 2008 –      2012                           GDP per  capita (PPP), $    ...
Tele2 Russia: Mobile market overview                               MOBILE SUBSCRIBERS (000 000)                           ...
Tele2 Russia: Mobile market overview                       MOBILE MARKET SHARES                                           ...
Mobile ARPU development                         p       Even if prices are pressured in Russia, Tele2 will see stable or g...
Tele2 Russia: Mobile data market                                                                                          ...
The B2B opportunity          pp       y                      Connections (millions) and ARPU (RUB)                        ...
Tele2 regional expansion opportunities                g        p        ppPopulation     (Million)                        ...
4G license background     •    Tele2 has submitted an application letter to join the 4G consortium set up to          inve...
Technology neutrality21
Summary•        After the financial crisis Russia is         back on track with GDP growth         projected at 4.2% in 20...
Exploiting growth opportunities     in Sweden23
A continued shift from fixed to mobile and voice to     data      Sources: PTS, Analysys Mason, Ovum24
Swedish telecom market trends             VOICE VS. DATA PERSPECTIVE             SWE TELECOM REVENUES (BNSEK)      100%   ...
Smartphones change the customers’ behavior                            customers                                           ...
Smartphones drive revenue growth     •    Increased usage and ASPU                                                   Top 1...
Communication As a Service (CAS)     increases revenue                 Service revenues for SME                         (0...
4G is a substitution for fixed broadband                                                                                  ...
Summary     •   A continued shift f               i   d hif from fi d to                               fixed         mobil...
31
APPENDIX32
Tele2 at citigroup conference 20110322
Tele2 at citigroup conference 20110322
Tele2 at citigroup conference 20110322
Tele2 at citigroup conference 20110322
Tele2 at citigroup conference 20110322
Tele2 at citigroup conference 20110322
Tele2 at citigroup conference 20110322
Tele2 at citigroup conference 20110322
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Tele2 at citigroup conference 20110322

  1. 1. CITI European & Emerging E ropeanMarkets Telecoms ConferenceMats GranrydCEOMarch 22, 2011
  2. 2. Agenda g Tele2 in brief Q4 2010 summary Exploiting E l iti growth opportunities i R th t iti in Russia i Exploiting growth opportunities in Sweden11 2010-10-20
  3. 3. Tele2 – An Eastern European growth machine • SEK 40 billion in revenue • Of which 70 percent mobile • 31 million customers in 11 countries • Tele2 always provides the Best Deal • Through price leadership and • Quality in all customer touch points2
  4. 4. Q4 2010 summary3
  5. 5. Highlights Q4 2010 g g Group: – Net customer intake for the group 803,000 in Q4 2010 – Net sales grew by 2 percent. Currency-adjusted net sales grew by 8 percent – EBITDA grew by 10 percent Currency adjusted percent. Currency-adjusted EBITDA grew by 18 percent44 2010-10-20
  6. 6. Highlights Tele2 Russia g g • 755,000 (1,149,000) new customers in Q4 2010 • Revenue grew by 24 percent in i Q4 201055 2010-10-20
  7. 7. Highlights Tele2 Sweden g g • Increased mobile revenue growth of 12 percent • Adding 20,000 (20,000) mobile customers, of which 65,000 (51,000) postpaid • Mobile EBITDA margin 30 (33) percent, due to a larger intake of percent smart phone customers and increased costs to JVs • 4G launch in five major cities66 2010-10-20
  8. 8. Tele2 Netherlands: Revenues, segments & g focus areas Share of total revenue 2010 Tele2 NL network Corporate Fixed & BB (22%) SME Fixed & BB (7%) Wholesale (10%) IRU • Tele2 Business is the largest • Big potential in addressing SME • Shift from voice to more data. Leeuwarden competitor to KPN. That position will segment by building indirect Own Groningen Build be developed & strenghtened by channel. • Focus on Ethernet portfolio Assen acquisition of BBned Alkmaar • Improved offering andLondonL d • Focus on Fixed Data & Telephony, market position via BBned LelystadZwolle Haarlem Enschede strong position in the corporate & (‘BBeyond’) with a strong indirect Amsterdam governmental segment. Deventer Amersfoort channel The Hague Utrecht Arnhem Rotterdam Nijmegen Den Bosch Residential Fixed & BB (46%) Mobile (15%) Breda Middelburg Eindhov en Venlo Focus on Broadband 3P bundles Currently MVNO based Frankfurt Antwerp Brussels Heerlen Develop Best Deal position Paris Maastricht77 2010-10-20
  9. 9. Highlights Tele2 Kazakhstan g g • During the quarter Tele2 added 114 000 quarter, 114,000 new customers in Kazakhstan, a sequential improvement of the total customer stock by 52 percent • Focus on widening the distribution network throughout the country t k th h t th t • Interconnect lowered as of 2011 with good support from NRA88 2010-10-20
  10. 10. Group financial profile99 2010-10-20
  11. 11. Net debt and dividend targets g • Shareholder remuneration – “Tele2 will seek to pay a progressive ordinary dividend of 50 percent or more of net income excluding one-off items. Extraordinary dividends and the authority to purchase Tele2 s own shares will be sought when the Tele2’s 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 p g g q requirements.” • Balance sheet – “Tele2 has a target net debt to EBITDA ratio of between 1 25 and 1 75 Tele2 1.25 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 operations, opportunities and contingent liabilities.”10 10 2010-10-20
  12. 12. Tele2’s general g g group targets g • Best D l B t Deal position iti • Targeting a long-term g g g 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 , y region11 11 2010-10-20
  13. 13. Exploiting growth opportunities in Russia12
  14. 14. Macro outlook Consumer & Labor Market Indices 2008 – 2012 GDP per  capita (PPP), $ 18500 13,3 14,0 , CPI, % 18000 Real Disposable Income  Growth,  % 12,0 Budget deficit, % of GDP 2009 2010 2011F 17500 Unemployment  rate, % 17000 10,0 Russia 6.1 4.1 2.0 8,8 8,8 16500 7,7 EMEA (incl. Russia) 5.8 5.0 3.7 7,0 8,0 16000 8,4 Eurozone 6.3 63 6.0 60 4.7 47 15500 7,3 7,1 6,8 6,0 6,4 US 10.2 8.6 6.3 15000 14500 3,4 F 4,0 Japan 5.6 6.5 7.5 2,7 27 2,4 2,6 26 2,3 14000 Global 6.0 5.3 4.3 2,0 13500 13000 0,0 00 2008 2009 2010 2011F* 2012F* Further outlook is for stable macro-environment and positive economic growth p gSources: Actual data & 2010 estimate – Official statistics; forecast – Deutsche Bank EM Outlook 2011, World Bank Outlook13
  15. 15. Tele2 Russia: Mobile market overview MOBILE SUBSCRIBERS (000 000) AND PENETRATION  (%) Penetration 250 160% Prepaid share 219Mobile subscribers (million) 208 212 213 217 200 188 150% 173 152 149% 151% 140% 150 143% 146% 147% 130% P 100 129% 120% 50 119% 110% 0 105% 100% 2006 2007 2008 2009 1Q 10 2Q 10 3Q 10 4Q 10 1Q 10 2Q 10 3Q 10 4Q 10 NET ADDITIONS QUARTERLY CHURN   Share of adds (%) MTS Vimpelcom MegaFon Tele2 PERCENT Tele2 100%Net additions Quarterly churn 13% 80% 60% 10% 40% Q 7% 20% 0% 4% ‐20% 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10Source: AC&M – 3Q10 Report, Mayson Analysis – Voice Quarterly Metrics, Nov 8th 2010 14
  16. 16. Tele2 Russia: Mobile market overview MOBILE MARKET SHARES MOBILE MARKET SHARES PERCENT OF ACTIVE SUBSCRIBERS PERCENT OF ACTIVE SUBSCRIBERS PERCENT OF RETAIL REVENUES 40% 35,0%Mobile market shares Mobile market shares 35% 30,0% 30% 25,0% , m m 25% Mobile TeleSystems 20,0% Mobile TeleSystems 20% VimpelCom VimpelCom 15,0% 15% MegaFon MegaFon Tele 2 T l 2 10,0% 10 0% Tele 2 T l 2 10% 5% 5,0% 0% 0,0% 2006 2007 2008 2009 1Q10 2Q10 3Q10 2006 2007 2008 2009 1Q10 2Q10 3Q10 Average TELE2 share (old regions) – 38.5% Average TELE2 share (new regions) – 14% Average TELE2 share (total 37) – 28%Source: AC&M Consulting – 3Q10 Report, Mayson Analysis – Voice Quarterly Metrics, Nov 8th 2010 15 2010-10-20
  17. 17. Mobile ARPU development p Even if prices are pressured in Russia, Tele2 will see stable or growing ARPU Source: World Economic Outlook, Oct. 2010; Analysis Mason, Country Report Data: Russia, Oct 2010; ACM Consulting16
  18. 18. Tele2 Russia: Mobile data market BIG4 DATA REVENUE BREAKDOWN* TELE2 REGIONS, PERCENT, 3Q10 14% 29% МТС МегаФон 22% ВымпелКом Tele2 35% BIG4 DATA TRAFFIC BREAKDOWN* DATA REVENUE TELE2 REGIONS,  PERCENT, 3Q10 MTS Vimpelcom MegaFon Tele2 3% 9 МТС 8 МегаФон 7 7 18% 21% ВымпелКом Tele2 58% Data Rev, % of total Revenues17 * Tele2 regions internal, BIG 3 – J’son & Partners, 2011, otherwise AC&M, 2010 2010-10-20
  19. 19. The B2B opportunity pp y Connections (millions) and ARPU (RUB) Service Revenues (BRUB) CAGR 2010- 22,5 5,6% 2015 CAGR 2010- 5,5 4,7% 20,7 20 7 2015 19,4 -1,3% 4,6 25,1% 2,2 4,4 0,8 18,1% 17,1 3,7 11,4% 0,4 1,5 1,4 0,6 14,8% 17,9 18,5 15,6 2,8% 15,7 -3,3% 3,4 3,3 -0,3% 2010 2015 2010 2015 2010 2015 Handsets MBB ARPU Voice ARPU Non‐Voice Voice Broadband Non‐Voice Current Tele2 B2B Russia Target Market (Service revenues) The total Russian B2B market is app. USD 4,4 billion with 1% 19% expected 2010 2015 CAGR 2010-2015 at 5% T2 Target Market T2 Revenues Total Market T2 Target Market18 Source: Analysys Mason
  20. 20. Tele2 regional expansion opportunities g p ppPopulation (Million) COVERAGE MAPTotal Market 142Tele2 61 CHUKOTSKINew licenses 12,5 Мурманск КалининградCombined 73,5 С.-Петербург Петрозаводск Псков П Нарьян-Мар В.Новгород KORYAKSKI Архангельск Вологда Смоленск Тверь Ярославль МОСКВА Сыктывкар MAGADANSKAYA Кострома Брянск Калуга Дудинка Курск Орел Тула Иваново KOMI-PERMIATSKI Владимир Рязань Н.Новгород р д YAMALO-NENETSKI KAMCHATSKAYA Белгород Липецк Киров YAKUTIA Саранск Тамбов Йошкар-Ола Воронеж Казань Пермь HANTY-MANSIYSKI Ижевск Краснодар Тура Екатеринбург Р.-на-Дону Саратов Волгоград Самара Майкоп Уфа Челябинск Тюмень Элиста Ставрополь HABAROVSKI Оренбург KURGANSKAYA Астрахань Омск Томск Красноярск PENZENSKAYA SAKHALINSKAYA Махачкала ULIANOVSKAYA Новосибирск Кемерово AMURSKYA UST-ORDYNSKI Чита Барнаул Улан-Удэ EVREISKAYA Иркутск Кызыл PRIMORIE Горно-Алтайск Opportunity for Tele2 to expand 2G coverage 19
  21. 21. 4G license background • Tele2 has submitted an application letter to join the 4G consortium set up to investigate the feasibility of 3G and 4G in a number of radio frequency bands • The Government has approved the “perspective radio frequency plan” for 800, 900, 2300 and 2600 MH b d t b used f th 3G/4G mobile b db d b 2014 2015 d MHz bands to be d for the bil broadband by 2014-2015 • As per officials’ public statements technology neutrality shall be adopted by 2015 officials LTE 1800 is viewed as a viable 4G opportunity by a number of market players20
  22. 22. Technology neutrality21
  23. 23. Summary• After the financial crisis Russia is back on track with GDP growth projected at 4.2% in 2011• The 17 regions launched in 2009 had a great start, and there is still a lot of market to capture• Upcoming new licenses may give further geographical expansion Tele2 Russia’s inherent organic growth is complemented by an array of new opportunities Russia s 22
  24. 24. Exploiting growth opportunities in Sweden23
  25. 25. A continued shift from fixed to mobile and voice to data Sources: PTS, Analysys Mason, Ovum24
  26. 26. Swedish telecom market trends VOICE VS. DATA PERSPECTIVE SWE TELECOM REVENUES (BNSEK) 100% 90% 80% 70% 60% Mobile data 50% 40% Fixed BB 30% Mobile voice Mobile voice 20% Fixed Voice 10% 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 MOBILE DATA TB USAGE (RESIDENTIAL) 140 000 120 000 100 000 100 000 80 000 Mobile data is increasing,TB 60 000 40 000 driven by smartphones and 20 000 0 mobile broadband 2010 2011 2012 2013 2014 2015 TB/year Sources: Parella Weinberg Partners , Analysys Mason, PTS 25
  27. 27. Smartphones change the customers’ behavior customers Tele2 customers’ demand for data solutions is The Swedish mobile market increasing rapidly Smartphones vs. regular phones Share of total market Sales of data packages increased 400% in 2010 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 0% 2009 2010 2011 2012 2013 2014 Smartphone Active mobile handset subscribers More than 60 percent of Tele2’s p p p prepaid customers converting to postpaid change to a smartphone Sources: Analysys Mason Sources: Internal data26
  28. 28. Smartphones drive revenue growth • Increased usage and ASPU Top 10 phone sales (Oct-Dec) – A customer used to a regular phone quickly increases usage of voice, text and data 1 iPhone4 – ASPU increases with almost 20% 2 iPhone 3GS 3 Sony Ericsson X8 4 HTC Desire 5 HTC Desire HD Smartphone user, who previously used a regular 6 Samsung E1080 phone 7 Samsung Galaxy S Minutes* SMS MMS Data ASPU** Up-lift 13% 21% 26% 975% 19% 8 HTC Wildfire * Out-going minutes 9 Nokia 1208 ** ARPU excluding operator revenue and installments 10 Sony Ericsson X10 Mini Pro27
  29. 29. Communication As a Service (CAS) increases revenue Service revenues for SME (000s) IP Centrex extensions $30 250 $25 200 $20 150 $15 100 $10 $5 50 $0 0 2008 2009 2010 2011 2012 2013 2014 2008 2009 2010 2011 2012 2013 2014 • Tele2 has strengthened its product portfolio within the CAS segment – Acquired Spring Mobil in 2010 – Integrated the departments working with CAS to gain an increased focus on customers28
  30. 30. 4G is a substitution for fixed broadband Revenue from data 2004-2009 25% venue/Revenue e K) 4G benefits for Tele2 29000 Mobile revenue (MSEK 23% 28000 21% 27000 19% • Increased customer intake 26000 17% 25000 15% Data-Rev – Substitute for Fixed Broadband 24000 13% 23000 11% • Improved quality perception 22000 9% 2004 2005 2006 2007 2008 2009 • Higher ARPU • Lower production costs29 Source: Analysis mason, 2010
  31. 31. Summary • A continued shift f i d hif from fi d to fixed mobile and voice to data • Smartphones change the customers’ behavior and drive revenue growth • Good potential for further market p share gain in the SME segment • 4G can provide a substitute for fixed id b tit t f fi d broadband30
  32. 32. 31
  33. 33. APPENDIX32
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