THIRD QUARTER 2009 21 October 2009
AGENDA CEO review Financial review Concluding remarks Harri Koponen Lars Nilsson Harri Koponen 2 2009-10-21 Third quarter 2009
HIGHLIGHTS Q3 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 3 2009-10-21 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 4 2009-10-21 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 5 2009-10-21 Third quarter 2009
RUSSIAN FOOTPRINT 6 2009-10-21 Third quarter 2009
NET INTAKE RUSSIA (In thousands) 1200 1000 800 600 400 200 0 New regions Old regions 359 449 379 742 350 136 105 84 128 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 7 2009-10-21 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 8 2009-10-21 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 9 2009-10-21 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 10 2009-10-21 Third quarter 2009
TELE2 ALWAYS PROVIDES THE BEST DEAL Price leadership through best in class cost control Rewarded quality network Standardized product portfolio 11 2009-10-21 Third quarter 2009
AGENDA CEO review Financial review Concluding remarks Harri Koponen Lars Nilsson Harri Koponen 12 2009-10-21 Third quarter 2009
Q3 2009 GROUP RESULTS SEK million Q3 09 Q3 08 Change % Continuing operations, Net Sales 9,763 9,520 3% EBITDA 2,375 2,240 6% - EBITDA margin (%) 24.3% 23.5% Depreciation and joint venture -924-852 - Depreciation of net sales (%) 9.5% 8.9% One-off items 116-969 EBIT 1,567 419 Normalized EBIT 1,451 1,388 - Normalized EBIT margin (%) 14,9% 14,6% Financial items 199-290 Taxes 418 27 Net result, continuing operations 2,184 156 Net result, discontinued operations -478 692 Net result 1,706 848 13 2009-10-21 Third quarter 2009
YTD 2009 GROUP RESULTS SEK million YTD 09 YTD 08 Change % Continuing operations, Net Sales 29,376 28,286 4% EBITDA 6,997 6,007 16% - EBITDA margin (%) 23,8% 21,2% Depreciation and joint venture -2,759-2,715 - Depreciation of net sales (%) 9,4% 9,6% One-off items 53-1,623 EBIT 4,291 1,669 Normalized EBIT 4,238 3,292 - Normalized EBIT margin (%) 14,4% 11,6% Financial items -376-420 Taxes -179-224 Net result, continuing operations 3,736 1,025 Net result, discontinued operations -230 514 Net result 3,506 1,539 14 2009-10-21 Third quarter 2009
TAXES Taxes in income statement (MSEK) One-Off Normal Reported Q1-196 -77-273 Q2 - -324-324 Q3 862-444 418 666-845 -179 Taxes in cash flow statement (MSEK) One-Off Normal Reported Q1-359 -97-456 Q2 - -124-124 Q3 - -98-98 -359-319 -678 15 2009-10-21 Third quarter 2009
OUR CURRENCIES Currency EUR / EUR pegged RUB USD YTD Average 09 vs. 08 14 % - 6 % 27 % Fixing rate Sep 09 vs Dec 08-6 % - 11 % - 10 % 16 2009-10-21 Third quarter 2009
NET ASSETS IN FOREIGN CURRENCIES 30 1,1 1,0 20 10 6,2 5,9 12,1 7,0 6,1 10,4 Other RUB EUR pegged EUR 0 Year-end 2008 Q3 2009 Total 25.3 bsek Total 24.5 bsek 17 2009-10-21 Third quarter 2009
CASH FLOW FOR Q3 2009 SEK million OPERATING ACTIVITIES Cash flow from operations, other Taxes paid Changes in working capital CASH FLOW FROM OPERATING ACTIVITIES Q3 09 2,433 98 252 2,587 Q3 08 2,405 90 279 2,594 INVESTING ACTIVITIES CAPEX Cash Flow after CAPEX Acquisition and sale of shares and participations, net 1,065 1,522 208 1,314 930 1,664 2,125 3,789 18 2009-10-21 Third quarter 2009
CASH FLOW FOR YTD 2009 SEK million OPERATING ACTIVITIES Cash flow from operations, other Taxes paid Changes in working capital CASH FLOW FROM OPERATING ACTIVITIES YTD 09 6,385 678 710 6,417 YTD 08 6,236 257 20 5,959 INVESTING ACTIVITIES CAPEX Cash Flow after CAPEX Acquisition and sale of shares and participations, net 3,292 3,125-341 2,784 3,375 2,584 1,491 4,075 19 2009-10-21 Third quarter 2009
GROUP FINANCIAL PROFILE Net debt Net debt incl. JV Net debt/ EBITDA 2008 Net debt incl. JV/ EBITDA 2008 25 000 20 000 15 000 10 000 5 000 0 3,5 3 2,5 2 1,5 1 0,5 0 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 20 2009-10-21 Third quarter 2009
ROCE 19,0% 18,0% 17,0% 16,0% 15,0% 14,0% 13,0% 12,0% 11,0% 10,0% 9,0% 8,0% 7,0% 6,0% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2007 2008 2009 21 2009-10-21 Third quarter 2009
NET INTAKE PER SEGMENT 1500 Mobile Fixed broadband Fixed telephony 1000 500 0-500 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 22 2009-10-21 Third quarter 2009
GROUP CUSTOMER STOCK 30 000 Group Customer Stock Mobile Fixed Broadband Fixed Telephony 25 000 Group Mobile Customer Stock Post paid voice Pre paid voice Mobile Internet 25 000 20 000 20 000 15 000 10 000 5 000 15 000 10 000 5 000 0 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 0 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Strong intake in the Mobile segment Driven by pre-paid voice adding 1 300 000 new customers 23 2009-10-21 Third quarter 2009
GROUP Q3 2009 NET SALES Mobile Fixed broadband Fixed telephony Other 12000 10000 8000 6000 4000 2000 0 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 24 2009-10-21 Third quarter 2009
GROUP Q3 2009 EBITDA Mobile Fixed broadband Fixed telephony Other Group EBITDA margin 3 000 2 500 2 000 1 500 1 000 500 0-500 25% 24% 23% 22% 21% 20% Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 19% 25 2009-10-21 Third quarter 2009
MOBILE Q3 2009 EBITDA Mobile Mobile EBITDA margin 1 800 1 700 1 600 1 500 1 400 1 300 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 30% 25% 20% 15% 10% 5% 0% 26 2009-10-21 Third quarter 2009
SWEDISH MOBILE MARGIN Temporary negatively affected by increased costs for hardware related to postpaid customers 37% 36% 35% 34% 33% 32% 31% 30% 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 27 2009-10-21 Third quarter 2009
MoU AND ARPU DEVELOPMENT Sweden Russia 230 220 210 200 190 180 Q1 08 Q2 08 Q3 08 Q4 08 Q2 09 Q3 09 240 230 220 210 200 190 70 60 50 40 30 20 10 0 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 220 210 200 190 180 170 ARPU MoU ARPU MoU Relatively strong development despite challenging economical times Swedish ARPU being driven down by an increasing customer base in Mobile Internet 28 2009-10-21 Third quarter 2009
FIXED BROADBAND Q3 2009 EBITDA Fixed broadband Fixed broadband EBITDA margin 400 300 200 100 0-100 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 25% 20% 15% 10% 5% 0% -5% 29 2009-10-21 Third quarter 2009
FIXED TELEPHONY Q3 2009 EBITDA Fixed Telephony Fixed telephony EBITDA margin 500 400 300 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 30% 29% 28% 27% 26% 25% 24% 23% 30 2009-10-21 Third quarter 2009
GROUP Q3 2009 EBIT Mobile Fixed broadband Fixed telephony Other Group EBIT margin 2 000 1 500 1 000 500 0-500 -1 000 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 16% 14% 12% 10% 8% 6% 4% 2% 0% 31 2009-10-21 Third quarter 2009
GROUP Q3 2009 CAPEX Mobile Fixed broadband Fixed telephony Other Capex/sales 1 500 15% 1 000 10% 500 5% 0 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 0% 32 2009-10-21 Third quarter 2009
AGENDA CEO review Financial review Concluding remarks Harri Koponen Lars Nilsson Harri Koponen 33 2009-10-21 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 34 2009-10-21 Third quarter 2009
Q&A 35 2009-10-21 Third quarter 2009
36 2009-10-21 Third quarter 2009 THE BEST DEAL
Appendix A 37 2009-10-21 Third quarter 2009
TELE2 SWEDEN MOBILE Mobile subscriber Net intake 3 400 3 350 3 300 3 250 3 200 3 150 3 100 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 140 120 100 80 60 40 20 0 38 2009-10-21 Third quarter 2009
TELE2 SWEDEN MOBILE (contd) Mobile net sales EBITDA marg. EBIT marg. 2 000 1 950 1 900 40,00% 35,00% 30,00% 25,00% 20,00% 1 850 1 800 1 750 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 15,00% 10,00% 5,00% 0,00% 39 2009-10-21 Third quarter 2009
TELE2 SWEDEN MOBILE (contd) Post paid voice Pre paid voice Mobile Internet 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 0 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 40 2009-10-21 Third quarter 2009
TELE2 NORWAY MOBILE Mobile subscriber Net intake 465 460 455 450 445 440 435 430 425 420 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 25 20 15 10 5 0-5 -10 41 2009-10-21 Third quarter 2009
TELE2 NORWAY MOBILE (contd) Mobile net sales EBITDA marg. 670 660 650 640 630 620 610 600 590 580 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 12,00% 10,00% 8,00% 6,00% 4,00% 2,00% 0,00% 42 2009-10-21 Third quarter 2009
TELE2 RUSSIA MOBILE Mobile subscriber Net intake 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 1400 1200 1000 800 600 400 200 0 43 2009-10-21 Third quarter 2009
TELE2 RUSSIA MOBILE (contd) Mobile subscriber Net intake 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 1400 1200 1000 800 600 400 200 0 44 2009-10-21 Third quarter 2009
TELE2 BALTIC MOBILE Mobile subscriber Net intake 3 600 60 3 500 40 3 400 20 3 300 0 3 200-20 3 100-40 3 000 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09-60 45 2009-10-21 Third quarter 2009
TELE2 BALTIC MOBILE (contd) Estonia net sales Lithuania net sales Latvia net sales EBITDA marg. 1200 36,00% 1000 800 34,00% 32,00% 600 400 200 30,00% 28,00% 0 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 26,00% 46 2009-10-21 Third quarter 2009
TELE2 CROATIA MOBILE Mobile subscriber Net intake 900 800 700 600 500 400 300 200 100 0 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 80 70 60 50 40 30 20 10 0 47 2009-10-21 Third quarter 2009
TELE2 CROATIA MOBILE (contd) Mobile net sales EBITDA marg. 400 350 300 250 200 150 100 50 0 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% -45,00% 48 2009-10-21 Third quarter 2009
Appendix B 49 2009-10-21 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 50 2009-10-21 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 51 2009-10-21 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 52 2009-10-21 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 53 2009-10-21 Third quarter 2009
FINANCIAL ITEMS Q3 SEK million Q3 09 Q3 08 Change External Net interest expenses 111 132 21 Exchange rate differences, external 138 209 347 Other financial items 10 16 6 17-357 374 Exchange rate differences, intragroup 182 67 115 Financial items 199-290 489 54 2009-10-21 Third quarter 2009
FINANCIAL ITEMS YTD SEK million YTD 09 YTD 08 Change External Net interest expenses 349 314-35 Exchange rate differences, external 64 93 157 Other financial items 41 71 30-326 -478-152 Exchange rate differences, intragroup 50 58 108 Financial items -376-420 44 55 2009-10-21 Third quarter 2009
56 2009-10-21 Third quarter 2009 THE BEST DEAL