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Tele2 Q3 2016 presentation

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Tele2 Q3 2016 presentation

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Tele2 Q3 2016 presentation

  1. 1. THIRD QUARTER 2016 October 20, 2016 Tele2AB
  2. 2. Delivering on our long term strategy Winning People & Culture Value Champion Step-Change Productivity Focused Technology Choices • Swedish 4G geographic coverage reaches 88% • Baltics 4G population coverage now at 99% • Netherlands data on-loading on own network at 77% • Group mobile end-user service revenue up 6% • Sweden mobile end-user service revenue growth of 2% • Netherlands mobile end-user service revenue up 15% • Strong EBITDA contribution from Sweden, Baltics and Kazakhstan • Kazakhstan JV synergy plan progressing well • Challenger program on track for SEK1bn per annum benefits 2 • Integration of Altel employees on track • Preparing for integration of TDC
  3. 3. Group highlights – Q3 2016 3 Q3 2016 % Change Reported LFL is constant currencies and pro forma for Altel % Change LFL Mobile end-user service revenue (SEK billion) 3.64 +6% +6% EBITDA (SEK billion) 1.56 -2% -1% Net sales (SEK billion) 6.96 +3% +1%
  4. 4. Sweden – Financials Net sales (SEK million) Mobile end-user service revenue (SEK million) Q3 Highlights EBITDA and EBITDA margin (SEK million) 1 889 1 841 1 797 1 821 1 928 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 0 500 1 000 1 500 2 000 2 500 +2%0% +5% 4 – Record mobile end-user service revenue driven by seasonal ASPU increase and strong intake – Net sales flat mainly due to higher mobile revenues, offset by lower fixed telephony and wholesale revenues – EBITDA uplift through improved data monetization, strong roaming and realized efficiencies from Challenger initiatives 3 100 3 299 3 053 3 018 3 095 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 0 500 1 000 1 500 2 000 2 500 3 000 3 500 1 014 946 894 846 1 068 33% 29% 29% 28% 35% 0% 10% 20% 30% 40% 50% 60% Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 0 200 400 600 800 1 000 1 200
  5. 5. Sweden – Improving trends Consumer postpaid mobile end- user service revenue Share of sales with bundle >0.5GB – Consumer postpaid mobile end-user service revenue up 7% driven by increased data consumption and strong Comviq customer intake – Tele2 increasingly attracting customers to premium value buckets – New Tele2 advertising campaign, launched post quarter end, to strengthen Tele2 within our dual brand strategy Q3 Highlights Geographic coverage 2G/4G Q3 15 Q3 16 5 +7% 73% 84% 85% Q1 16 Q2 16 Q3 16 83% 88% Q3 15 Q3 16
  6. 6. Baltics – Financials Q3 Highlights 6 Net sales (SEK million) EBITDA and EBITDA margin (SEK million) Mobile end-user service revenue (SEK million) 488 476 468 477 521 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 0 100 200 300 400 500 600 263 257 246 256 287 32% 32% 32% 33% 32% 0% 10% 20% 30% 40% 50% 60% Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 0 50 100 150 200 250 300 350 832 815 770 787 884 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 0 100 200 300 400 500 600 700 800 900 1 000 – Net sales driven by continued demand for data services – Mobile end-user service revenue growth driven by data monetisation and strong summer marketing campaigns – Strong EBITDA performance continues +7%+6% +9%
  7. 7. Baltics – Data monetization continues 7 ASPU development Share of 4G capable smartphones in base Q3 Highlights 4G population coverage – Strong data monetization driven by prepaid to postpaid transition and data centric pricing – Data consumption stimulated by an increasing rate of 4G handset penetration – 99% network coverage drives higher data usage and purchase of top-up data buckets 82% 99% Q3 15 Q3 16Q3 15 Q3 16 17% 32% Q3 15 Q3 16 +7%
  8. 8. Netherlands – Financials Q3 Highlights – Net sales up due to strong mobile momentum, offset by decline in fixed – Strong mobile end-user service revenue driven by almost 20% increase in customer base year-on-year – EBITDA impacted by investments related to mobile launch and decline in fixed – An impairment of SEK 2.5bn was recognized in Q3 8 Net sales (SEK million) EBITDA (SEK million) Mobile end-user service revenue (SEK million) 364 403 322 336 419 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 0 50 100 150 200 250 300 350 400 450 122 35 -31 -116 -2 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 -150 -100 -50 0 50 100 150 1 440 1 512 1 441 1 452 1 478 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 0 200 400 600 800 1 000 1 200 1 400 1 600 +3% -102%+15%
  9. 9. Netherlands – Continuing momentum Spontaneous brand awareness & brand consideration (Memo2) Share of total new postpaid (GfK) Data usage on own network Q3 Highlights – Awareness and consideration continued to build behind our innovative “Fun Rebel Campaign”, competitive offerings and network performance – Maintaining a strong market share of new postpaid contracts, despite increased competitive pressure – Good progress in data on-loading on own network driven by network rollout at 98% outdoor and 83% indoor coverage – Roll-out of VoLTE initiated with over 50k subscribers 9 27% 77% Pre-launch Sep 16 4G 34% 43% 41% 56% Pre-launch Sep 16 Awareness Consideration 12% 19% Pre-launch Oct 15 Aug 16
  10. 10. – Significant mobile end-user service revenue growth due to pricing and an increasing customer base – Net sales lower this quarter due to Altel handset sales campaign launched in Q3 last year – Positive EBITDA development driven by revenue growth, improved operating leverage and synergies from JV integration Kazakhstan – Financials 10 Q3 Highlights LFL is constant currency and pro forma for Altel Net sales, LFL (SEK million) EBITDA and EBITDA margin, LFL (SEK million) Mobile end-user service revenue, LFL (SEK million) 358 377 390 404 428 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 0 50 100 150 200 250 300 350 400 450 583 664 513 540 575 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 0 100 200 300 400 500 600 700 +20%-1% +204% 26 -35 13 44 794% -5% 3% 8% 14% -50% -40% -30% -20% -10% 0% 10% 20% Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 -40 -20 0 20 40 60 80 100 120 140
  11. 11. 80% Closing Q1 16 Q2 16 Q3 16 Plan Progress Kazakhstan – Strong performance 4G outdoor population coverage JV integration Q3 Highlights 11 Customer base, LFL (thousands) LFL is pro forma for Altel – 4G outdoor population coverage remains a competitive advantage – Customer base continues to grow year-on-year, despite competitive pressure – JV integration plan on track 5 767 6 384 Q3 15 Q3 16 +11% 30% 70% Q4 16 E Q3 15 Tele2 Kcell / Beeline 80%
  12. 12. Challenger program on track Simplify % of products harmonized on shared platforms Discipline % of spend strategically sourced & procured Consolidate % of reduction in IT OpEx as share of revenue Transform % of staff in Shared Operations 2016 target 2018 targetBaseline 30% 40% 60% 40% 75% 80% 0% 5% 20% 12% 18% 25% Key progress areas in the quarter  Data analytics and optimized marketing spend driving improved ROI  Transfer of ~90 Dutch FTEs to Indian partner started this quarter, bringing total to ~200 FTEs  Productivity improvement program announced in Sweden, with an estimated reduction of 225 FTEs  Product simplification initiative progressing. More than 900 products closed year-to-date 12
  13. 13. Financial Overview 13
  14. 14. 3 422 3 641 39 33 55 78 -7 Q3 15 Sweden Baltics NL KZ RoW Oth Q3 16 Mobile end-user service revenue Tele2 Group (SEK million) 14 3 422 3 282 3 168 3 350 3 641 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 +6% Development per market (SEK million) 21
  15. 15. 1 599 1 562 54 24 -124 29 12 -32 Q3 15 Sweden Baltics NL KZ RoW Oth Q3 16 EBITDA Tele2 Group (SEK million) 15 -2% Development per market (SEK million) 1 599 1 337 1 226 1 087 1 562 23,5% 19,3% 19,0% 16,3% 22,4% 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 0 200 400 600 800 1000 1200 1400 1600 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 EBITDA margin
  16. 16. CAPEX Tele2 Group (SEK million) 16 -16% Development per market (SEK million) 932 779 51 -15 -139 11 -63 2 Q3 15 Sweden Baltics NL KZ RoW Oth Q3 16 932 1 223 1 154 820 779 13,7% 17,6% 17,9% 12,3% 11,2% 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 0 200 400 600 800 1000 1200 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 CAPEX / Net sales
  17. 17. Free cash flow Total operations Tele2 Group (SEK million) Development (SEK million) Free cash flow = Cash flow from operating activities and CAPEX paid17 169 -291 -154 139 838 -500 -300 -100 100 300 500 700 900 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 169 838 139 -37 51 -46 706 49 -54 Q3 15 EBITDA Interest etc Taxes Working capital CAPEX One-off items Q3 16+396%
  18. 18. Debt position and financial leverage Economic net debt to EBITDA 12 m rolling 18 9,8 9,9 9,4 11,7 11,0 0,00 0,25 0,50 0,75 1,00 1,25 1,50 1,75 2,00 2,25 0,0 2,5 5,0 7,5 10,0 12,5 Sep 2015 Dec 2015 Mar 2016 Jun 2016 Sep 2016 Economic net debt Economic net debt to EBITDA Economic net debt is defined as net debt excluding liabilities from Kazakhtelecom and liabilities guaranteed by Kazakhtelecom 2,13 LeverageSEK billion
  19. 19. Rights Issue 19 Background • Acquisition of TDC Sweden announced on 21st June to strengthen our B2B position in Sweden (not conditional upon equity financing) • In conjunction, the company announced the intention to raise equity through a Rights issue • EGM to be held on 27th October Equity financing • Financing through equity issue with preferential rights for existing shareholders to maintain the Company’s financial strength • Tele2’s largest shareholder, Kinnevik, has committed to subscribe for its rights • Nordea Bank AB has entered into a standby underwriting commitment for the remaining portion
  20. 20. Financial guidance 2016 * Based on LFL which is constant currencies and pro forma for Altel20 Net sales (SEK billion) EBITDA (SEK billion) 26 – 27 4.6 – 5.0 CAPEX (SEK billion) 3.7 – 4.1 Mobile end-user service revenue Mid-single digit % growth*
  21. 21. Summary 21
  22. 22. Key priorities moving forward  Sustain momentum in Sweden  Continue to monetize 4G investments  Continued integration of Altel in Kazakhstan  Execute on Challenger Program  Closing of TDC 22 Winning People & Culture Value Champion Step-Change Productivity Focused Technology Choices
  23. 23. Tele2’s Way2Win The Tele2 Way We are challengers, fast-movers and will always offer our customers what they need for less We will be champions of customer value in everything we do How we win Focused Technology Choices Value Champion Step-Change Productivity Winning People & Culture Vision Mission Where we play Mobile access Our current footprint Residential and Business IoT Responsible Challenger 23
  24. 24. THE END

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