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THIRD QUARTER 2012
Tele2 AB
October 18, 2012
2
Agenda
• About Q3 2012
• Financial review
• Concluding remarks
3
Tele2 Group Q3 Highlights
• Net mobile customer intake of 1.5 million leading to a total customer base of 37.7 million
• Net sales growth for the Group amounted to 9% excluding exchange rate differences, corresponding to SEK 10,906 million
• EBITDA amounted to SEK 3,002 million, equivalent to a margin of 28%
• CAPEX amounted to SEK 1,229 million
4
Focus Continue to grow customer base and maximize the 2G opportunity Evaluate possibilities to expand carefully through new licenses as well as by
complementary acquisitions Make progress on technology neutrality
Market Area Russia: Overview
Population Appr. 143 million
Tele2 Russia 43 regions of Russian Federation 22.3 million subscribers Mobile operator #4 in Russia in terms
of subscribers and revenue
Represents 30% of total net sales in Q3 2012
5
0%
5%
10%
15%
20%
0
1,000
2,000
3,000
4,000
Q3 11 Q4 11 Q1 12 Q2 12 Q3 1232%
34%
36%
38%
40%
42%
0
400
800
1,200
1,600
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12
Q3 Highlights Russia
EBITDA and EBITDA MARGIN
NET SALES and YoY NET SALES GROWTH
CUSTOMER BASE and CUSTOMER INTAKE
SEK Million
YoY net sales growth (right)
Net sales (left) EBITDA margin (right)
EBITDA (left) Customer base (left) Customer net intake (right)
Thousands of customers SEK Million
• Strong customer net intake of 710,000• Increased EBITDA margin, amounting to 38%• ARPU continues to grow, showing a growth of
4% YoY
0
200
400
600
800
16,000
18,000
20,000
22,000
24,000
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12
6
NET ADDITIONS
Thousands of subscribers
TELE2 SUBSCRIBERS AS PART OF TOTAL RUSSIAN MOBILE MARKET
The Russian mobile market overview
Million subscribers
ANNUALIZED CHURN RATE
Source: Company data, AC&M Consulting
ARPU DEVELOPMENT
RUB
Tele2
Tele2Vimpelcom
MegaFonMTS
Tele2Vimpelcom
MegaFonMTS
234
0
100
200
300
400
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Q212
Q312
0
50
100
150
200
250
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Q212
9.5%6.5% 7.7% 8.8%
4% growth
Tele2Vimpelcom
MegaFonMTS
-4 000
-2 000
0
2 000
4 000
6 000
8 000
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Q212
Q312
0%
20%
40%
60%
80%
Q3-11 Q4-11 Q1-12 Q2-12 Q3-12
7
92% 92% 91% 92% 92%
8% 8% 9% 8% 8%
0
1,000
2,000
3,000
4,000
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12
Q3 Revenue Source Development
Voice and data demonstrate 8% and 12% YoY growth respectively
VOICE & OTHER and DATA REVENUE SPLIT DEVELOPMENT
Data accessVoice & other
SEK millions
8
Regulatory update: significant developments
Technology neutralityOn October 2, GKRCh* requested the Telecom Ministry to analyze the studies about using 900 MHz band for UMTS and 1800 MHz for LTE by December 1. Tele2 will further contribute to the discussion on LTE1800. The next GKRCh meeting is tentatively scheduled for December 7, 2012
* GKRCh – State Commission on Radio Frequencies
New regional licensesOn October 2, the GKRCh meeting agenda included the discussion of 9 GSM1800 license distributions. According to the statements of Ministry officials, the current plan is to distribute them via auctions although the auctions timing and the conditions have not yet been announced. Tele2’s participation in the auctions will depend on their terms and conditions.
9
Tele2 Russia forward looking statement
The following assumptions should be taken into account when estimating the operational performance of the total operations in Russia in 2012:
• Tele2 expects the subscriber base to reach approximately 22.5 (earlier 22) million.
• Tele2 expects ARPU to grow by 3-5 percent in local currency.
• Tele2 expects an EBITDA margin of between 37-39 percent.
• Tele2 expects capex of between SEK 1,300 - 1,500 million.
10
Market Area Nordic: Overview
Population 14.4 million
Tele2 Sweden and Tele2 Norway Home market and test bed for new services
Represents 40% of total net sales in Q3 2012Sweden 29%; Norway 11%
Focus Sweden: Build on mobile growth and 4G roll-out coupled with household / corporate
fiber strategy Norway: Roll out own network and focus on bucket-price subscriptions
11
Q3 Highlights Tele2 Sweden
• Net sales amounted to SEK 3,189 million and EBITDA amounted to SEK 966 million
• Mobile service revenue growth of 4% YoY excluding interconnect, and 2% including interconnect
• Mobile EBITDA margin of 33%, affected by the introduction of iPhone 5
Mobile Fixed telephonyFixed broadband OtherCustomer base (left) Customer net intake (right)
EBITDA margin (right)
YoY net sales growth (right)
SEK MillionSEK MillionThousands of customers
EBITDA and EBITDA MARGIN
NET SALES and YoY NET SALES GROWTH
CUSTOMER BASE and CUSTOMER INTAKE
-4%
-2%
0%
2%
0
1,000
2,000
3,000
4,000
Q3 11 Q4 11 Q1 12 Q2 12 Q3 120%
10%
20%
30%
40%
0
250
500
750
1,000
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12-80
-40
0
40
80
4,500
4,600
4,700
4,800
4,900
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12
12
Bucket price plans
Launch of new Comviq price plan
Continued demand for fixed fee price plans
13
2G and 4G network roll-out
2G
4G 80% population coverage
Shared network activated on Gotland and on the West Coast of Sweden
14
Smartphone market development
Sales of top ten mobile phones Tele2 Sweden (Q32012)
1. iPhone 4S2. Samsung Galaxy SIII3. iPhone 54. iPhone 45. Samsung Galaxy Ace6. Samsung Galaxy SII7. HTC Desire C8. Samsung Galaxy Gio9. Sony Xperia Acro S10.Samsung E1080
Regular handset Smartphone
* Postpaid residential, quantity of handsets
SMARTPHONE INSTALLED BASE*
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1111 1112 1201 1202 1203 1204 1205 1206 1207 1208 1209
15
Tele2 Sweden forward looking statement
The following assumptions should be taken into account when estimating the operational performance of the Swedish mobile operations in 2012:
• Tele2 expects mobile service revenue to grow by approximately 3-4 percent.
• Tele2 expects an EBITDA margin of between 30-32 percent, assuming that the market environment will remain stable.
16
Q3 Highlights Tele2 Norway
• Strong focus on network roll-out• Satisfactory net intake of 14,000 mobile customers• Tele2 Norway reported total external revenue of SEK 1,184
million, of which SEK 1,117 million was mobile revenue• Mobile EBITDA contribution was SEK 101 million
Mobile Fixed telephonyFixed broadband OtherCustomer base (left) Customer net intake (right)
EBITDA margin (right)
YoY net sales growth (right)
SEK MillionSEK MillionThousands of customers
EBITDA and EBITDA MARGIN
NET SALES and YoY NET SALES GROWTH
CUSTOMER BASE and CUSTOMER INTAKE
-10%
20%
50%
80%
0
400
800
1,200
1,600
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12-10%
-5%
0%
5%
10%
-100
-50
0
50
100
150
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12-30
-15
0
15
30
0
400
800
1,200
1,600
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12
17
Tele2 Norway forward looking statement
The following assumptions should be taken into account when estimating the operational performance of the total operations in Norway in 2012:
• Tele2 expects a total revenue of between SEK 4,800-5,000 million.
• Tele2 expects an EBITDA margin of between 4-6 (earlier 2-3) percent.
• Tele2 expects capex of between SEK 450-550 (earlier 850-950) million.
18
Market Area Western Europe: Overview
Focus Netherlands Growth in mobile and B2B Austria B2B & continuous integration of Silver Server Germany Grow Fixed Via Mobile product
Population108 million
Leading the group in business to business services and consumer fixed broadband
Represents 16% of total net sales in Q3 2012
Netherlands 11%; Germany 2%; Austria 3%
19
Q3 Highlights Tele2 Netherlands
SEK MillionSEK MillionThousands of customers
• Financial performance continues to be stable • Mobile intake above plan – net intake of 51,000
customers in Q3 and 96,000 YTD, with a significant part in the high value mobile postpaid segment
• Several successful large corporate contracts signed push intake in B2B
Mobile Fixed telephonyFixed broadband OtherCustomer base (left) Customer net intake (right)
EBITDA margin (right)
YoY net sales growth (right)
EBITDA and EBITDA MARGIN
NET SALES and YoY NET SALES GROWTH
CUSTOMER BASE and CUSTOMER INTAKE
-15%
-10%
-5%
0%
5%
10%
0
400
800
1,200
1,600
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12-10%
0%
10%
20%
30%
40%
-200
0
200
400
600
800
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12-40
-20
0
20
40
0
300
600
900
1,200
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12
20
Q3 Highlights Tele2 Germany and Tele2 Austria
TELE2 GERMANYEBITDA and EBITDA MARGIN
TELE2 AUSTRIAEBITDA and EBITDA MARGIN
EBITDA margin (right)
EBITDA (left) EBITDA margin (right)
EBITDA (left)
SEK Million SEK Million
• Austria and Germany continue to show stable profitability
• Tele2 Germany: Fixed via Mobile partly compensates the decline in fixed
• Tele2 Austria: B2B data intake remains steady throughout the quarter, delivering stable financial performance
• Successful integration of Silver Server almost finalized
0%
10%
20%
30%
40%
0
30
60
90
120
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12
0%
10%
20%
30%
40%
0
30
60
90
120
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12
21
Focus Continued rapid market share growth in Kazakhstan Efficiency improvements in Baltics Improvements in market share growth in Croatia
Market Area Central Europe and Eurasia: Overview
Population28 million
Represents 13% of total net sales in Q3 2012
Estonia 2%; Latvia 2%; Lithuania 3%; Croatia 3%; Kazakhstan 3%
22
• Stable financial performance and profitability in a competitive market
• Tele2 Estonia maintains a positive net intake of mobile customers
• Modernization of network and 4G roll-out currently ongoing
Q3 Highlights Tele2 Estonia
MOBILE CUSTOMER BASE and CUSTOMER INTAKEThousands of customers
Mobile customer base (left) Customer net intake (right)
SEK Million
NET SALES and YoY NET SALES GROWTH
YoY net sales growth (right)
Net sales (left)
EBITDA and EBITDA MARGIN
EBITDA margin (right)
EBITDA (left)
SEK Million
0%
10%
20%
30%
40%
0
20
40
60
80
Q3 11 Q4 11 Q1 12 Q2 12 Q3 120%
3%
6%
9%
12%
0
75
150
225
300
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12-10
0
10
20
30
0
150
300
450
600
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12
23
Q3 Highlights Tele2 Latvia
• Tele2 Latvia maintains high efficiency in a competitive market• EBITDA margin amounted to 34%• Net customer intake of 21,000• Rolling out 4G when commercially attractive
CUSTOMER BASE and CUSTOMER INTAKEThousands of customers
Customer base (left) Customer net intake (right)
SEK Million
NET SALES and YoY NET SALES GROWTH
YoY net sales growth (right)
Net sales (left)
EBITDA and EBITDA MARGINSEK Million
EBITDA margin (right)
EBITDA (left)
-40
-20
0
20
40
0
300
600
900
1,200
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12-25%
-20%
-15%
-10%
-5%
0
100
200
300
400
Q3 11 Q4 11 Q1 12 Q2 12 Q3 1232%
34%
36%
38%
40%
0
30
60
90
120
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12
24
Q3 Highlights Tele2 Lithuania
• Significant intake of 38,000 mobile customers• EBITDA margin amounted to 35%• Continuing strong performance
MOBILE CUSTOMER BASE and CUSTOMER INTAKEThousands of customers
Mobile customer base (left) Customer net intake (right)
SEK Million
NET SALES and YoY NET SALES GROWTH
YoY net sales growth (right)
Net sales (left)
EBITDA and EBITDA MARGINSEK Million
EBITDA margin (right)
EBITDA (left)
-15%
-10%
-5%
0%
5%
0
100
200
300
400
Q3 11 Q4 11 Q1 12 Q2 12 Q3 1210%
20%
30%
40%
50%
0
40
80
120
160
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12-5
10
25
40
55
0
500
1,000
1,500
2,000
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12
25
MARKET SHARE DEVELOPMENT (revenue; 100% of the market)
MARKET SHARE DEVELOPMENT (EBITDA; 100% of the market)
Tele2 Lithuania continues to outperform its competitors in terms of Revenue market share growth and EBITDA market share. Tele2 has the highest
service revenue among all competitors
Tele2 Lithuania – a success story
0%
10%
20%
30%
40%
50%
60%
Tele2 Company A Company B
0%
10%
20%
30%
40%
50%
60%
Tele2 Company A Company B
26
Q3 Highlights Tele2 Croatia
• Positive net intake of 33,000 customers• Focus on maintaining a positive cash flow• An impairment of goodwill and other fixed assets amounting to
SEK 250 million was done in the quarter
CAPEX
EBITDA-CAPEX
SEK Million
CUSTOMER BASE and CUSTOMER INTAKE
Thousands of customers
Customer base (left) Customer net intake (right)
SEK Million
NET SALES and YoY NET SALES GROWTH
YoY net sales growth (right)
Net sales (left)
EBITDA and EBITDA MARGIN
SEK Million
EBITDA margin (right)
EBITDA (left) EBITDA
EBITDA-CAPEX
-150
-90
-30
30
90
0
250
500
750
1,000
Q311
Q411
Q112
Q212
Q312
-15%
-10%
-5%
0%
5%
0
125
250
375
500
Q311
Q411
Q112
Q212
Q312
0%
3%
6%
9%
12%
0
15
30
45
60
Q311
Q411
Q112
Q212
Q312
-50
-25
0
25
50
Q311
Q411
Q112
Q212
Q312
27
Tele2 Croatia forward lookingstatement
The following assumption should be taken into account when estimating the operational performance of the Croatian mobile operations in 2012:
• Tele2 expects Croatia to reach an EBITDA margin of between 4-6 percent.
28
Q3 Highlights Tele2 Kazakhstan
• Continuing strong net intake of 589,000 customers • Total number of customers amounted to 3.1 million• Continuing rapid roll-out of new base stations for increased
coverage
CUSTOMER BASE and CUSTOMER INTAKEThousands of customers
Customer base (left) Customer net intake (right)
SEK Million
NET SALES and YoY NET SALES GROWTH
YoY net sales growth (right)
Net sales (left)
EBITDA and EBITDA MARGINSEK Million
EBITDA margin (right)
EBITDA (left)
-100%
-75%
-50%
-25%
0%
-160
-80
0
80
160
Q3 11 Q4 11 Q1 12 Q2 12 Q3 120
200
400
600
800
1,000
0
750
1,500
2,250
3,000
3,750
Q3 11 Q4 11 Q1 12 Q2 12 Q3 120%
150%
300%
450%
600%
0
75
150
225
300
Q3 11 Q4 11 Q1 12 Q2 12 Q3 12
29
-500
0
500
1,000
1,500
2,000
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Q212
Q312
The Kazakhstan mobile market overview
MOBILE SUBSCRIBERS – MARKET SHARE NET ADDITIONSThousands of subscribers
10.5%
Dalacom/PathwordTele2 Kcell/Activ
Beeline Dalacom/PathwordTele2 Kcell/Activ
Beeline
3.5%
Tele2 Kazakhstan has reached more than 3 million customers within 18 months of operations
0%
25%
50%
75%
100%
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Q212
30
Tele2 Kazakhstan forward-looking statement
The following assumptions should be taken into account when estimating the operational performance of the total operations in Kazakhstan in 2012:
• Tele2 expects the subscriber base to reach approximately 3.4 (earlier 3.0) million.
• Tele2 expects an EBITDA contribution of between SEK -350 to -400 million
• Tele2 expects capex of between SEK 450-500 (earlier 550-600) million.
• Tele2 expects to reach EBITDA break-even by 2H 2013.
• Tele2 expects to reach a long-term mobile customer market share of 30 percent.
31
Agenda
• About Q3 2012
• Financial review
• Concluding remarks
32
SEK million Q3 2012 Q3 2011 ∆%
Net sales 10,906 10,429 4.6%
EBITDA 3,002 2,986 0.5%
EBITDA margin (%) 27.5% 28.6% -1.1%
Depreciation & associated companies -1,147 -989 16.0%
Depreciation of net sales (%) -10.5% -9.5% -1.0%
One-off items -538 -20
EBIT 1,317 1,977 -33.4%
Normalized EBIT 1,855 1,997 -7.1%
Normalized EBIT margin (%) 17.0% 19.1% -2.1%
Financial items -219 -287
Taxes -118 -431
Net profit from continuing operations 980 1,259 -22.2%
Discountinued operations - 1
Net profit 980 1,260 -22.2%
Group results Q3
• During the quarter one-off items of SEK -538 million affected the EBIT result
• One-off tax items amounted to SEK +262 million
33
SEK million YTD 2012 YTD 2011 FY 2011 ∆%
Net sales 32,451 30,149 41,001 7.6%
EBITDA 8,288 8,339 11,212 -0.6%
EBITDA margin (%) 25.5% 27.7% 27.3% -2.1%
Depreciation & associated companies -3,604 -2,974 -4,158 21.2%
Depreciation of net sales (%) -11.1% -9.9% -10.1% -1.2%
One-off items -555 22 -4
EBIT 4,129 5,387 7,050 -23.4%
Normalized EBIT 4,684 5,365 7,054 -12.7%
Normalized EBIT margin (%) 14.4% 17.8% 17.2% -3.4%
Financial items -718 -591 -674
Taxes -712 -1,203 -1,472
Net profit from continuing operations 2,699 3,593 4,904 -24.9%
Discountinued operations - -7 -7
Net profit 2,699 3,586 4,897 -24.7%
Group results YTD
34
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
EUR RUB NOK
Average YTD Sept 2012 vs. YTD Sept 2011 Fixing rate Sept 2012 vs. Dec 2011
Currency movements YTD
EUR/EUR pegged and RUB currencies represent 57 % of external sales and 73 % of EBITDA
35
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
12.5%
0
200
400
600
800
1,000
1,200
1,400
Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12
Depreciation Depreciation of net sales (%)
Depreciation
Depreciation and Depreciation as a percentage of net sales
Change year-on-year for Q3
• Acquisition of Network Norway: SEK 80 million
• Upgrade/replacement of networks in the Baltics:SEK 65 million
• Reduction in Sweden:SEK -55 million
• Growth Russia and Kazakhstan: SEK 61 million
SEK million
36
Financial items in cash flow statement Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011
Interest paid -154 -76 -388 -150 -366
Financial items in income statement Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011
Interest income/costs -259 -180 -710 -308 -483
Exchange rate differences, external -12 -11 -19 -53 -24
Exchange rate differences, intragroup 88 -53 135 -92 13
Other financial items -36 -43 -124 -138 -180
Total -219 -287 -718 -591 -674
Financial items
37
Taxes in income statement Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011
Normal -380 -431 -974 -1,203 -1,580
One-off 262 - 262 - 108
Total -118 -431 -712 -1,203 -1,472
Taxes in cash flow statement Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011
Normal -178 -235 -492 -785 -948
One-off - - - - -
Total -178 -235 -492 -785 -948
Taxes
• One time valuation of deferred tax assets in Austria SEK +262 million
• Deferred tax assets at year to date amounted to SEK 2.5 billion (Dec 2011: SEK 3 billion)
38
SEK million Q3 2012 Q3 2011 YTD 2012 YTD 2011 FY 2011
OPERATING ACTIVITIES
Cash flow from operations, excl. taxes and interest 2,866 2,978 8,165 8,402 11,261
Interest paid -154 -76 -388 -150 -366
Taxes paid -178 -235 -492 -785 -948
Change in working capital 244 59 -421 -205 -257
Cash flow from operating activities 2,778 2,726 6,864 7,262 9,690
INVESTING ACTIVITIES
CAPEX -1,076 -1,142 -3,323 -3,819 -5,572
Cash flow after CAPEX 1,702 1,584 3,541 3,443 4,118
Shares and other financial assets 3 51 -200 -3 -1,563
Cash flow after investing activities 1,705 1,635 3,341 3,440 2,555
Cash flow
39
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
20.0
Q4 '11 Q1 '12 Q2 '12 Q3 '12
Revolving Credit Facility Russian bond Commercial paper
Swedish bond Norwegian bond Other financing
Put option Kazakhstan Cash Pro forma net debt
Pro forma financial debt profileSources of fundingSEK billion
12.812.1
16.9
15.2
40
12.812.1
16.915.2
2.92.9
2.9 2.9
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
20.0
Q4 '11 Q1 '12 Q2 '12 Q3 '12
Pro forma net debt Ordinary dividend (paid May 2012)
Extraordinary dividend (paid May 2012) Leverage net
Debt position and ratioPro forma net debt / EBITDA 12 m rollingSEK billion / Ratio
41
0%
8%
15%
23%
30%
0
500
1,000
1,500
2,000
Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12
22%
19%
16% 16%
21%
0%
5%
10%
15%
20%
25%
Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12
0
2,000
4,000
6,000
8,000
10,000
12,000
Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '1220%
22%
24%
26%
28%
30%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12
Group financialsGroup EBITDA and Group EBITDA margin
Group CAPEX (BS) and CAPEX/Sales ROCE (Normalized)
Group Net SalesSEK million SEK million
SEK million Percent
Group EBITDA margin
CAPEX/Sales
► Mobile► Fixed telephony
► Fixed broadband► Other operations
42
Agenda
• About Q3 2012
• Financial review
• Concluding remarks
43
Concluding remarks
Continue to grow as an operator
Manage the shift from voice to data
Continue to migrate from prepaid to postpaid
Exploit new services and opportunities by offering our customers what they need for less
44
Q&A
45
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