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 Sweden
11 2010-10-20
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 points
2
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
8 percent
– EBITDA grew by 10 percent Currency adjusted
percent. Currency-adjusted
18 percent
44 2010-10-20
6. Highlights Tele2 Russia
g g
• 755,000 (1,149,000) new
customers in Q4 2010
• Revenue grew by 24 percent
in
i Q4 2010
55 2010-10-20
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 smart
percent
phone customers and increased costs to JVs
• 4G launch in five major cities
66 2010-10-20
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 and
London
L 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
Maastricht
77 2010-10-20
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 NRA
88 2010-10-20
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 group's
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. 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
region
11
11 2010-10-20
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
Percen
EMEA (incl. Russia) 5.8 5.0 3.7
USD
7,0 8,0
16000 8,4
Eurozone 6.3
63 6.0
60 4.7
47
nt
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
2,3 Global 6.0 5.3 4.3
14000
2,0
13500
13000 0,0
00
2008 2009 2010 2011F* 2012F*
Further outlook is for stable macro-environment and positive economic growth
p g
Sources: Actual data & 2010 estimate – Official statistics; forecast – Deutsche Bank EM Outlook 2011, World Bank Outlook
13
15. Tele2 Russia: Mobile market overview
Penetration
Prepaid share
Mobile subscribers (million)
P
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 4Q10
Source: AC&M – 3Q10 Report, Mayson Analysis – Voice Quarterly Metrics, Nov 8th 2010
14
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. 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 Consulting
16
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 Revenues
17 * Tele2 regions internal, BIG 3 – J’son & Partners, 2011, otherwise AC&M, 2010
2010-10-20
19. The business opportunity
pp y
Connections (millions) and ARPU (RUB) Service Revenues (BUSD)
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 percent
T2 Target Market T2 Revenues Total Market T2 Target Market
18
Source: Analysys Mason
20. Tele2 regional expansion opportunities
g p pp
Population (Million) COVERAGE MAP
Total Market 142
Tele2 61
CHUKOTSKI
New licenses 12,5 Мурманск
Калининград
Combined 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. 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 players
20
22. 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
21
24. A continued shift from fixed to mobile and voice to
data
60
50 M2M
Billion SEK
IP-TV
40
Mobile Messaging (SMS/MMS)
30 Mobile Data
B
Fixed Business Data
20
Fixed Broadband
10 Mobile Voice
0 Fixed Voice
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Sources: PTS, Analysys Mason, Ovum
23
25. 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 data
24
26. Smart phones 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 Pro
25
27. 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 customers
26
28. 4G is a substitution for fixed broadband
Revenue from data 2004 2009
2004-2009
4G benefits for Tele2
25%
e/Revenue
Mobile revenu (MSEK)
29000
23%
28000
• Increased customer intake 27000
21%
19%
ue
– Substitute for Fixed Broadband
Data-Revenue
26000 17%
25000 15%
• Improved quality perception 24000
23000
13%
11%
22000 9%
• Higher ARPU 2004
2004
2005
2005
2006
2006
2007
2007
2008
2008
2009
2009
• Lower production costs
27 Source: Analysis mason, 2010
29. 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
broadband
28
30. Tele2 s
Tele2’s group guidelines
• 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
region
29
