8. Mobile market overview Russia QUARTERLY CHURN TELE2 RUSSIAPercent NET INTAKE TELE2 RUSSIAThousands MoU AND ARPU RUSSIA Percent Min RUB Mobile TeleSystems Vimpelcom Megafon Tele2 Source: AC&M – 1Q11 Report, Analysys Mason – Russia Country report, Dec 2010 *Preliminary estimate
11. Improving EBITDA margin despite of subscriber base growthSource: AC&M Consulting 1Q11 Report; Company data
12. Tele2’s regional expansion opportunities COVERAGE MAP Moscow The results of the first GSM tender: Tele2 got licences in 6 new regions in the Far East
15. Mobile EBITDA margin amounted to 32 (34) percent.MOBILE EBITDA 12’M ROLLING AND MOBILE EBITDA MARGIN 12’M ROLLING SEK Million Percent Percent SEK Million
16. Smartphones are taking over the scene SHIPMENT OF HANDSETS TELE2 SWEDEN Percentage of total shipments INSTALL BASE TELE2 SWEDEN (POSTPAID) Percentage of total installed base Regular Smartphone Smartphones corresponded to 88% of Tele2’s total shipments of handsets in June 2011.
17. Smartphones are driving data consumption USERS AND DATA CONSUMPTION: ANDROID vs iOS (TELE2 SWEDEN) SALES OF HANDSETS BY BRAND(TELE2 SWEDEN, OWN SALES CHANNELS) Users Percent MB Apple Samsung HTC Sony Ericsson ZTE Nokia LG Motorola BlackBerry Rim In June 2011, the average Tele2 iOS user consumed 91% more data than the average Tele2 Android user. Approximately 50% of all smartphones sold were Apple-branded.
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19. We see 4G handsets and tablets coming in 2H 2011.99%* 4Gcoverage End of 2012 2011 *Percentage of the population 4G roll out status Q2 2011: Roll out completed in 14 cities covering 40% of the population
30. A new block of 2x30 MHz spectrum in the 800 MHz 'Digital Dividend' band will be auctioned with a block exclusively reserved for newcomers to bid on.Auction early 2012 Auction 2015 Auctioned 2010
39. Currency movements (vs. SEK) EUR/EUR pegged and RUB currencies approximately 2/3 of sales and EBITDA
40. Currency-adjusted Sales and EBITDA (excl. one-off) CURRENCY-ADJUSTED EBITDA, TOTAL +7 %SEK Million CURRENCY-ADJUSTED SALES, TOTAL +6.3 %SEK Million +23% +32% +3% +2% +1% -1% +1% -2% c c c MA Western Europe MA Central Europe Kazakhstan MA Russia MA Nordic
42. Cash flow for Q2 2011 Negative change in working capital affected by increased instalment sales of handsets
43. Group financial profile PROFORMA NET DEBT INCL. JV / EBITDA 12’M ROLLING SEK Billion Ratio Upper limit Lower limit Ordinary dividend Extraordinary dividend
44. Bal. sheet consideration / Fin. leverage When available, invest in value accretive M&A or new business opportunities meeting Tele2’s strict financial hurdles CASH GENERATION M&A / New growth opportunities Shareholder remuneration Enhance shareholder value by distributing recurring cash to shareholders Cash / Buffer Retain financial buffer Prudent assessment based on (a) status of operations, (b) future strategic opportunities, (c) competitive landscape and (d) general macroeconomic status
45. Net debt and dividend targets Shareholder remuneration “Tele2 will seek to pay a progressive ordinary dividend of no less than 50 percent of net income excluding one-off items. Extraordinary dividends and the authority to purchase Tele2’s own shares will be recommended or sought when the anticipated total return to shareholders is deemed to be greater than the achievable returns from the deployment of the capital within the group's operating segments or the acquisition of assets within Tele2’s economic requirements.” Balance sheet “Tele2 has a target net debt to EBITDA ratio of between 1.25 and 1.75 times over the medium term. The company’s longer term financial leverage should be in line with the industry and the markets in which it operates and reflect the status of its operations, future strategic opportunities and contingent.”
46. Debt profile June 2011 8.8 bn 0.9 bn 2.9 bn 2.4 bn Gross debt position SEK 15.0 bn Net debt amounts to 12.9 bn
47. Tele2 Russia Prices in Line with Much Larger Russian Peers Fairly adjusting for differences in maturity, the placement was executed at a yield 5bps tighter than Vimpelcom and 12bps wider than MTS Sources: Raiffeisenbank. Calculated by adding “fair” spread differential of 40bps to nearest Vimpelcom and MTS bond yields to account for difference in maturity compared to Tele2 Russia bonds.
48. Group EBITDA, Sales and Capex Fixed telephony Fixed broadband Other Mobile Mobile Fixed telephony Other Fixed broadband Mobile Fixed telephony Fixed broadband Other
55. Tele2 expects a similar EBITDA contribution in 2011 as in 2010 due to instalments and start up costs related to joint venture Net4Mobility.Sweden outlook (changed)
63. NorwayRussia Record EBITDA contribution. Nordic Robust mobile revenue growth. Western Europe Tele2 Netherlands finalized the integrationof BBned. Central Europe & Eurasia Successful launch of Tele2’s operations in Kazakhstan led to record customer intake. In short, all our markets are doing well.
67. Mobile market overview Russia Mobile TeleSystems Vimpelcom Megafon Tele2 Average TELE2 share (all Russia): 8.6% Average TELE2 share (old regions): 41%* Average TELE2 share (new regions): 17%* Average TELE2 share (total 37): 31%* * FDP Group, 1Q2011 Source: AC&M Consulting – 1Q11 Report
70. Large difference between major cities vs. rural areasSamma text som Q1 Source: Tele2 regions internal data; J’son & Partners 2011, AC&M Consulting 1Q11 Report;
71. Newly introduced cheap smartphones and feature phones suit our customers Handset trends Smartphones are dominating sales. 50% of the sales of the cheap smartphone ZTE Blade are to prepaid customers. iOS has the highest share of sales, but Android still represents the largest share of our smartphone customer stock. In total, 9 out of 10 sold phones are smartphones
72. Swedish telecom market trends Mobile data is increasing, driven by smartphones and mobile broadband Sources: Parella Weinberg Partners , Analysys Mason, PTS
73. Smartphones change the customers’ behaviour The Swedish mobile market Tele2 customers’ demand for data solutions is increasing rapidly 400% More than 60 percent of Tele2’s prepaid customers converting to postpaid change to a smartphone Sources: Analysys Mason; internal company data
Editor's Notes
(TOP LEFT) As you can see we are taking more than our fair share of the market and added 720,000 customers to our customer base during Q2. - (BOTTOM LEFT) Net additions: As shown by the diagram in the bottom left corner, Tele2 has had a stable net addition of customers while the big three Russian operators Megafon, Vimpelcom and MTS) have seen significant fluctuations in net additions. - Average TELE2 share (all Russia): 8.6% Average TELE2 share (old regions): 41%* Average TELE2 share (new regions): 17%* Average TELE2 share (total 37): 31%*2. Churn (TOP RIGHT). The turnover of the total customer base was stable during the quarter despite increased competition. - Best in class - customer retention - Commission structure to the retail channels - quality of the customer intake - Expanded the geographic scope with several preferred distribution partners3. (BOTTOM RIGHT) Russia is a multi SIM market and we can see that our Best Deal concept works very well. Both MoU and ARPU have increased during Q2, ARPU increased by 1.5% in RUB.
1. Tele2 has outperformed the big three in both subscriber based growth and revenue growth (YoY 1Q2011). 2. Tele2 has also seen a stable EBITDA margin growth while the margin has decreased for the other three players during the same period. 3. We grow very well and going forward we can benefit from the fact that our customers use our services more. 4. We constantly improve our EBITDA margin despite strong subscriber base growth.
1. In April, Tele2 participated in the “beauty contests” allocating 32 new GSM-licences in 18 regions (17 new for Tele2). 2. As seen by the blue areas on the map, the result from the beauty contest was that Tele2 was awarded licences in an additional 6 regions in the Far East of Russia during Q2 (covering approx. 1 million people). Tele2 now has licences in regions with a total population of 62 million people. 3. As always, Tele2 is looking for opportunities to find additional spectrum.
We see a continuous large share of smartphones among the shipments of handsets in Sweden. Shipped smartphones as part of total shipments of handsets reached 88% in Q2. Install base (postpaid) in Sweden sees a continuously larger share of smartphones, reaching 35.4% in Q2.
As in Q1, 9 out of 10 phones sold are smartphones. Apple is dominating the smartphones sales in our own channels in Sweden, with approx 50 % of all smartphones sold in June being Apple-branded. Samsung had the second largest share of sales in June, with appr. 15%. Even though Tele2’s sales are dominated by Apple-branded handsets, most of Tele2’s smartphone customers use Android. Figures show that data consumption for an iOS user averages 527 MB, while an Android user consumes on average 274 MB.
1. Tele2 Sweden continued the roll-out of the combined 2G and 4G network in the joint venture Net4Mobility.2. During Q2, six major cities were added to the list of what will become the network with the best coverage in Sweden. We have now covered 40% of the population.3. (Furthermore, through Net4Mobility, Tele2 acquired a licence in the 800 MHz frequency allowing the company to build a 2G/4G network throughout Sweden in a cost efficient way. )4. Tele2 is today offering 4G mobile broadband with speed up to 80 Mbit/s - unlimited surf at at 399 SEK/month. We are seeing 4G handsets and tablets arriving during 2H 2011.
1. In Q1 2012, all existing spectrum in the 900 and 1.800 MHz bands will be redistributed.2. All spectrum licenses are 'technology neutral‘.3. A new block of 2x30 MHz spectrum in the 800 MHz 'Digital Dividend' band will beauctioned with a block exclusively reserved for newcomers to bid on. 2x10 MHzreserved for newcomers. 70 million EUR.From Q1 presentation of the same picture: 1. Regulator has announced the auction, however the final conditions for the auction are not set yet.2. Tele2 is always looking into options to pursue a mobile strategy, however we need favorable conditions in order to reduce risks.3. Tele2 has good experiences in shared networks and is also looking in this direction.
Goal to deliver positive free cash flow in our Croatian operations during 2H 2011: - Further enhancing our network quality and capabilities - Developing our product portfolio with even more attractive offerings.Good customer intake of 27,000 customers despite seasonal increase in prepaid churn resulting from its Q3 2010 visiting customers.3. New Tele2 brand platform launched successfully. From rehearsal:Marketing / brand: Gregor, price plans, shop concepts, choosing innovative sales channels Roaming partner
1. Tele2 launched successfully in five regions during Q2. Total population of those regions exceeds 6 million, about 37% of the population of Kazakhstan. 2. Record strong net intake of 355,000 customers during Q2, coming mainly from the five new regions. Total customer stock in Q2 amounted to 663,000.3. Primary goal is to launch Tele2 brand in all regions in Kazakhstan by year-end. 4. Tele2 also has continued to work actively on negotiating even lower mobile termination rates for 2011 and 2012. From rehearsal:Licenses: Over time we need more frequencies to increase data usage also in Kazakhstan.
Final pricing regarded as a good result. Without a “benchmark” issue, price discovery is always difficult, and final pricing was tighter than expected (originally anticipated fair pricing of 8.75-9.00% p.a.)Trading price of the new bond will set the benchmark for next issue, allowing T2 to take advantage of any ability to move price down still further
1. Ever since Tele2 entered the Russian market, we have: Contributed to a more competitive telecommunications market, Been offering better terms and more affordable services to customers. 2. We grow very well and going forward we can benefit from the fact that our customers use our services more.
1. Tele2 sales are dominated by smartphones - Our smartphone install base reached 35% for postpaid in Q2. - Our smartphone install base reached 18% for prepaid in Q2 (huge potential to increase revenue from data!). - YTD sales of smart phones: 60% iOS, then Android and followed by Symbian. - We have approx. 50% more Android customers in our base compared to iOS.2. The smartphone trend in the Swedish market persisted as almost 9 out of 10 handsets in the Tele2 web shops and stores were smartphones but there is still a demand for cheap feature phones foremost in the prepaid segment. - Since its release the Iphone 4 has been the best selling phone. - Samsung Galaxy S 2 and HTC Incredible have a positive trend (some shortage in stock). - Huawei U3100 and Samsung E1080 are cheap feature phones (which are mostly sold to our prepaid customers).
Shift towards data, driven by mobile data2. Mobile data usage exploded last 2-3 years, driven by mobile broadband-Mobile bb is equal to ADSL today in number of subs. However ADSL has flattened out while Mobile bb continue to increase. Data Cost = All costs invoiced from N4M and Sunab regarding the mobile data are considered in GM2.Comments to the Mobile data margin: - N4M-costs increase by 100 Mkr 2011 vs 2010- N4M-costs increase by 170 Mkr 2012 vs 2011- N4M-costs increase by 25 Mkr 2013 vs 2012SmartphonesAlmost 90% of handset sales in Sweden in Q1 were Smartphones25-30% of handsets are Smartphones today and Tele2 has 20-25% of theseDistribution goes towards own stores, party becasuse of Smartphones and other more advanced products. 40-50% of competitors’ sales is through own stores.
Smartphones are taking off in the mobile market. More and more customers choose a data package and during 2010 sales increased by 400%Increasing share of residental postpaid customers that have a contract (90%)More than 60% of prepaid customers choose a smartphone as they convert to postpaid.
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