Quarterly report (Q3) 2009

THIRD QUARTER 2009

21 October 2009

2009-10-212 Third quarter 2009

AGENDA

CEO review Harri Koponen

Financial review Lars Nilsson

Concluding remarks Harri Koponen

2009-10-213 Third quarter 2009

• Solid result with all regions performing • Nordic

– Good customer intake– Increased focus on postpaid customers

• Russia– 7 new regions launched during the quarter– Roll-out according to or better than plan– 1 100 000 new customers

• Central Europe– Increased customer market share in the Baltic region

• Western Europe– All countries delivering healthy EBITDA contribution– Strong performance in The Netherlands and Austria

HIGHLIGHTS Q3

2009-10-214 Third quarter 2009

MARKET AREA NORDICS

Mobile

• Good customer intake driven by all segments

Corporate segment

• New contract wins in price sensitive market

Market strategy

• Price leadership in combination with expected

quality

2009-10-215 Third quarter 2009

MARKET AREA RUSSIA

Mobile

• 40.5 percent EBITDA margin in old regions

• Record high net intake

– New regions adding 742,000 customers

Market strategy

• Making the roll-out an efficient machinery

• Proven distribution strategy

2009-10-216 Third quarter 2009

RUSSIAN FOOTPRINT

2009-10-217 Third quarter 2009

NET INTAKE RUSSIA

105 84 128

742

449379

136

350

359

0

200

400

600

800

1000

1200

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

New regions Old regions(In thousands)

2009-10-218 Third quarter 2009

MARKET AREA WESTERN EUROPE

Fixed Broadband

• Launch of VDSL

• Gold standard for the group in the

corporate segment

Market strategy

• Investing for the future

• Corporate market share 7 percent

– Marks the potential

2009-10-219 Third quarter 2009

MARKET AREA CENTRAL EUROPE

Mobile

• Overall solid customer intake

• Defend market position and expand when

possible

Market strategy

• Economic turmoil creates opportunities for a

price leader

2009-10-2110 Third quarter 2009

ECONOMIC DEVELOPMENT

Our response to the economic downturn:

• EBITDA hurdle for a core business maintained at 20 percent

• Mobile on own infrastructure should target mid 30

percent

• ROCE target for the group 20 percent

2009-10-2111 Third quarter 2009

TELE2 ALWAYS PROVIDES

THE BESTDEAL

• Price leadership through best in class cost control

• Rewarded quality network

• Standardized product portfolio

2009-10-2112 Third quarter 2009

AGENDA

CEO review Harri Koponen

Financial review Lars Nilsson

Concluding remarks Harri Koponen

2009-10-2113 Third quarter 2009

Q3 2009 GROUP RESULTS

8481,706Net result

692-478Net result, discontinued operations

1562,184Net result, continuing operations

27418Taxes

-290199Financial items

14,6%14,9%- Normalized EBIT margin (%)

1,3881,451Normalized EBIT

4191,567EBIT

-969

8.9%

-852

23.5%

2,240

9,520

Q3 08

116One-off items

9.5%- Depreciation of net sales (%)

-924Depreciation and joint venture

24.3%- EBITDA margin (%)

6%2,375EBITDA

3%9,763Continuing operations, Net Sales

Change %Q3 09SEK million

2009-10-2114 Third quarter 2009

YTD 2009 GROUP RESULTS

1,5393,506Net result

514-230Net result, discontinued operations

1,0253,736Net result, continuing operations

-224-179Taxes

-420-376Financial items

11,6%14,4%- Normalized EBIT margin (%)

3,2924,238Normalized EBIT

1,6694,291EBIT

-1,623

9,6%

-2,715

21,2%

6,007

28,286

YTD 08

53One-off items

9,4%- Depreciation of net sales (%)

-2,759Depreciation and joint venture

23,8%- EBITDA margin (%)

16%6,997EBITDA

4%29,376Continuing operations, Net Sales

Change %YTD 09SEK million

2009-10-2115 Third quarter 2009

TAXES

-273-77-196Q1

-324-324-Q2

418-444862Q3

-845

Normal

666

One-Off

-179

ReportedTaxes in income statement (MSEK)

-456-97-359Q1

-124-124-Q2

-98-98-Q3

-319

Normal

-359

One-Off

-678

ReportedTaxes in cash flow statement (MSEK)

2009-10-2116 Third quarter 2009

“OUR” CURRENCIES

27 %

- 6 %

14 %

YTD Average

09 vs. 08

- 10 %USD

- 11 %RUB

- 6 %EUR / EUR pegged

Fixing rate

Sep 09 vs Dec 08Currency

2009-10-2117 Third quarter 2009

12,1 10,4

5,96,1

6,27,0

1,1 1,0

0

10

20

30

Year-end 2008 Q3 2009

Other

RUB

EUR pegged

EUR

NET ASSETS IN FOREIGN CURRENCIES

Total 25.3 bSEK Total 24.5 bSEK

2009-10-2118 Third quarter 2009

CASH FLOW FOR Q3 2009

1,664

2,125

3,789

1,522

–208

1,314

Cash Flow after CAPEX

Acquisition and sale of shares and participations, net

–930–1,065CAPEX

2,594

279

2,405

–90

Q3 08

INVESTING ACTIVITIES

2,587CASH FLOW FROM OPERATING ACTIVITIES

252Changes in working capital

2,433

–98

OPERATING ACTIVITIES

Cash flow from operations, other

Taxes paid

Q3 09SEK million

2009-10-2119 Third quarter 2009

CASH FLOW FOR YTD 2009

2,584

1,491

4,075

3,125

-341

2,784

Cash Flow after CAPEX

Acquisition and sale of shares and participations, net

–3,375–3,292CAPEX

5,959

–20

6,236

–257

YTD 08

INVESTING ACTIVITIES

6,417CASH FLOW FROM OPERATING ACTIVITIES

710Changes in working capital

6,385

–678

OPERATING ACTIVITIES

Cash flow from operations, other

Taxes paid

YTD 09SEK million

2009-10-2120 Third quarter 2009

0

5 000

10 000

15 000

20 000

25 000

Q2

07

Q3

07

Q4

07

Q1

08

Q2

08

Q3

08

Q4

08

Q1

09

Q2

09

Q3

09

0

0,5

1

1,5

2

2,5

3

3,5

Net debt Net debt incl. JV

Net debt/ EBITDA 2008 Net debt incl. JV/ EBITDA 2008

GROUP FINANCIAL PROFILE

2009-10-2121 Third quarter 2009

6,0%

7,0%

8,0%

9,0%

10,0%

11,0%

12,0%

13,0%

14,0%

15,0%

16,0%

17,0%

18,0%

19,0%

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2007 2008 2009

ROCE

2009-10-2122 Third quarter 2009

NET INTAKE PER SEGMENT

-500

0

500

1000

1500

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

Mobile Fixed broadband Fixed telephony

2009-10-2123 Third quarter 2009

GROUP CUSTOMER STOCK

Group Mobile Customer Stock

0

5 000

10 000

15 000

20 000

25 000

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

Post paid voice Pre paid voice Mobile InternetGroup Customer Stock

0

5 000

10 000

15 000

20 000

25 000

30 000

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

Mobile Fixed Broadband Fixed Telephony

• Strong intake in the Mobile segment

– Driven by pre-paid voice adding 1 300 000 new customers

2009-10-2124 Third quarter 2009

GROUP Q3 2009 NET SALES

0

2000

4000

6000

8000

10000

12000

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

Mobile Fixed broadband Fixed telephony Other

2009-10-2125 Third quarter 2009

GROUP Q3 2009 EBITDA

-500

0

500

1 000

1 500

2 000

2 500

3 000

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 19%

20%

21%

22%

23%

24%

25%

Mobile Fixed broadband Fixed telephony

Other Group EBITDA margin

2009-10-2126 Third quarter 2009

MOBILE Q3 2009 EBITDA

1 300

1 400

1 500

1 600

1 700

1 800

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

0%

5%

10%

15%

20%

25%

30%

Mobile Mobile EBITDA margin

2009-10-2127 Third quarter 2009

SWEDISH MOBILE MARGIN

30%

31%

32%

33%

34%

35%

36%

37%

Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009

Today, cost upfront If we had matched the cost for hardware with instalments from customers

Temporary negatively affected by increased costs for hardware related to post-

paid customers

2009-10-2128 Third quarter 2009

MoU AND ARPU DEVELOPMENT

Russia

0

10

20

30

40

50

60

70

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

170

180

190

200

210

220

ARPU MoU

Sweden

180

190

200

210

220

230

Q1 08 Q2 08 Q3 08 Q4 08 Q2 09 Q3 09

190

200

210

220

230

240

ARPU MoU

• Relatively strong development despite challenging economical times– Swedish ARPU being driven down by an increasing customer base in Mobile Internet

2009-10-2129 Third quarter 2009

FIXED BROADBAND Q3 2009 EBITDA

-100

0

100

200

300

400

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09-5%

0%

5%

10%

15%

20%

25%

Fixed broadband Fixed broadband EBITDA margin

2009-10-2130 Third quarter 2009

FIXED TELEPHONY Q3 2009 EBITDA

300

400

500

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

23%

24%

25%

26%

27%

28%

29%

30%

Fixed Telephony Fixed telephony EBITDA margin

2009-10-2131 Third quarter 2009

GROUP Q3 2009 EBIT

-1 000

-500

0

500

1 000

1 500

2 000

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

0%

2%

4%

6%

8%

10%

12%

14%

16%

Mobile Fixed broadband Fixed telephony

Other Group EBIT margin

2009-10-2132 Third quarter 2009

GROUP Q3 2009 CAPEX

0

500

1 000

1 500

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

0%

5%

10%

15%

Mobile Fixed broadband Fixed telephony

Other Capex/sales

2009-10-2133 Third quarter 2009

AGENDA

CEO review Harri Koponen

Financial review Lars Nilsson

Concluding remarks Harri Koponen

2009-10-2134 Third quarter 2009

CONCLUDING REMARKS

Top priorities

• Best Deal

• Roll-out of new regions in Russia

– All new regions launched by 1H 2010

• Targeting a long term mobile EBITDA margin in the mid 30’s

• Mobile challenger

2009-10-2135 Third quarter 2009

Q&A

2009-10-2136 Third quarter 2009

THE BEST DEAL

2009-10-2137 Third quarter 2009

Appendix A

2009-10-2138 Third quarter 2009

TELE2 SWEDEN MOBILE

3 100

3 150

3 200

3 250

3 300

3 350

3 400

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

0

20

40

60

80

100

120

140

Mobile subscriber Net intake

2009-10-2139 Third quarter 2009

TELE2 SWEDEN MOBILE (contd)

1 750

1 800

1 850

1 900

1 950

2 000

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

40,00%

Mobile net sales EBITDA marg. EBIT marg.

2009-10-2140 Third quarter 2009

TELE2 SWEDEN MOBILE (contd)

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

Post paid voice Pre paid voice Mobile Internet

2009-10-2141 Third quarter 2009

TELE2 NORWAY MOBILE

420

425

430

435

440

445

450

455

460

465

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

-10

-5

0

5

10

15

20

25

Mobile subscriber Net intake

2009-10-2142 Third quarter 2009

TELE2 NORWAY MOBILE (contd)

580

590

600

610

620

630

640

650

660

670

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

12,00%

Mobile net sales EBITDA marg.

2009-10-2143 Third quarter 2009

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

0

200

400

600

800

1000

1200

1400

Mobile subscriber Net intake

TELE2 RUSSIA MOBILE

2009-10-2144 Third quarter 2009

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

0

200

400

600

800

1000

1200

1400

Mobile subscriber Net intake

TELE2 RUSSIA MOBILE (contd)

2009-10-2145 Third quarter 2009

TELE2 BALTIC MOBILE

3 000

3 100

3 200

3 300

3 400

3 500

3 600

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

-60

-40

-20

0

20

40

60

Mobile subscriber Net intake

2009-10-2146 Third quarter 2009

TELE2 BALTIC MOBILE (contd)

0

200

400

600

800

1000

1200

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

26,00%

28,00%

30,00%

32,00%

34,00%

36,00%

Estonia net sales Lithuania net sales Latvia net sales EBITDA marg.

2009-10-2147 Third quarter 2009

TELE2 CROATIA MOBILE

0

100

200

300

400

500

600

700

800

900

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

0

10

20

30

40

50

60

70

80

Mobile subscriber Net intake

2009-10-2148 Third quarter 2009

TELE2 CROATIA MOBILE (contd)

0

50

100

150

200

250

300

350

400

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

-45,00%

-40,00%

-35,00%

-30,00%

-25,00%

-20,00%

-15,00%

-10,00%

-5,00%

0,00%

Mobile net sales EBITDA marg.

2009-10-2149 Third quarter 2009

Appendix B

2009-10-2150 Third quarter 2009

SWEDEN OUTLOOK

• Tele2 will continue to target higher market share in the postpaid segment, which in the longer term will lead to:

– Higher customer intake

– Improved ARPU

– Lower churn

Resulting in

– Higher customer lifetime value

• In the short term, this strategy will lead to higher total acquisition costs

Resulting in

– EBITDA margin towards 30 percent in 2010

2009-10-2151 Third quarter 2009

RUSSIA OUTLOOK

• Subscriber base should be able to reach18-19 million by YE 2011

• Maintain ARPU growth at 5% by 2011

• EBITDA margin 2010-2011

– Old regions’ EBITDA margin should evolve in the range of 40-45 percent

– New regions’ EBITDA margin should break even 2 years from launch

– Russia’s total EBITDA margin should develop in the range of 25-30

percent

• Capex 2010-2011

– Accumulated Capex in Russia should be in the range of SEK 4.5-5.0

billion

• Selected acquisitions – when available and under right conditions

2009-10-2152 Third quarter 2009

NET DEBT AND DIVIDEND TARGETS

• Shareholder remuneration

– “Tele2’s intention over the medium term is to pay a progressively

increasing ordinary dividend”

• Long-term financial leverage

– “Tele2’s longer-term financial leverage, defined as the

net debt /EBITDA ratio, should be in line with the industry and the

markets in which it operates”

• Short-term consideration

– “The company needs to take the uncertainties in the financial

markets into consideration and act accordingly”

2009-10-2153 Third quarter 2009

NET DEBT AND DIVIDEND TARGETS

• Cost control – best in class

• System makeover – we have started the journey

– Significant potential through cost savings and improved business intelligence

2009-10-2154 Third quarter 2009

FINANCIAL ITEMS Q3

-290

–16

-357

67

–209

–132

Q3 08

199

–10

17

182

138

–111

Q3 09

489

6

374

115

347

21

Change

Financial items

Other financial items

Exchange rate differences, intragroup

Exchange rate differences, external

External

Net interest expenses

SEK million

2009-10-2155 Third quarter 2009

FINANCIAL ITEMS YTD

-420

–71

-478

58

–93

–314

YTD 08

-376

–41

-326

–50

64

–349

YTD 09

44

30

-152

108

157

-35

Change

Financial items

Other financial items

Exchange rate differences, intragroup

Exchange rate differences, external

External

Net interest expenses

SEK million

2009-10-2156 Third quarter 2009

THE BEST DEAL