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
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