Quarterly report (Q2) 2009

SECOND QUARTER 200922 July 2009

2009-07-222 Second quarter 2009

AGENDA

CEO review Harri Koponen

Financial review Lars Nilsson

Concluding remarks Harri Koponen


• Record result with all regions performing• Nordic

– Good EBITDA contribution

• Russia– Strong operational momentum – Tomsk launched with good initial market traction

• Central Europe– Focus on maintaining our customer base and profitability

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

HIGHLIGHTS Q2


MOBILE HIGHLIGHTS Q2

• Sweden – Good customer intake driven by mobile internet

service• Russia

– Strong EBITDA margin – Strong net intake

• The Baltic Region– Create a platform for future growth


MARKET TRENDS

• Develop distribution strategies

• Stimulate customer activity

• Introduce diversified pre-paid services


CORPORATE SEGMENT• Sweden

– New contract wins in price sensitive market

• The Netherlands – Gold standard for the group

• Austria– New strategy is paying off


• Price leadership through best in class cost control

• Rewarded quality network

• Standardized product portfolio

HOW DO WE CREATE THE BEST DEALB

ES

T D

EA

L


ECONOMIC DEVELOPMENT• The effects of the global recession can still be

observed in some parts of Tele2’s operations

• The Company has acted and can see positive effects on OpEx and CapEx– The contingency plan will continue


AGENDA





Q2 2009 GROUP RESULTS

-591,152Net result-22012Net result, discontinued operations1611,140Net result, continuing operations

-167-324Taxes-10217Financial items

11,9%14,9%- Normalized EBIT margin (%)1,1671,506Normalized EBIT4301,447EBIT-737

8,7%

-934

21,4%

2,1019,832Q2 08

-59One-off items9,2%- Depreciation of net sales (%)-944Depreciation and joint venture

24,2%- EBITDA margin (%)17%2,450EBITDA

3%10,130Continuing operations, Net SalesChange %Q2 09SEK million


H1 2009 GROUP RESULTS

6911,800Net result-171196Net result, discontinued operations8621,604Net result, continuing operations

-251-597Taxes-130-575Financial items

9,8%14,0%- Normalized EBIT margin (%)1,8972,839Normalized EBIT

1,2432,776EBIT-654

8,9%

-1,864

19,4%

3,76119,359H1 08

-63One-off items8,9%- Depreciation of net sales (%)

-1,838Depreciation and joint venture23,1%- EBITDA margin (%)

24%4,677EBITDA5%20,250Continuing operations, Net Sales

Change %H1 09SEK million


FINANCIAL ITEMS Q2

-102

-47-127

25

14-94

Q2 08

17

-11-18

35

92-99

Q2 09

129

36109

10

78-5

Change

Financial items

Other financial items

Exchange rate differences, intragroup

Exchange rate differences, external

ExternalNet interest expenses

SEK million


FINANCIAL ITEMS H1

-130

-55-121

-9

116-182

H1 08

-575

-31-343

-232

-74-238

H1 09

-445

24-222

-223

-190-56

Change

Financial items

Other financial items

Exchange rate differences, intragroup

Exchange rate differences, external

ExternalNet interest expenses

SEK million


“OUR” CURRENCIES

+ 33 %+ 15 %

- 4 %+ 16 %

YTD Average09 vs. 08

+ 1 %USD-”BALTICS”

- 5 %RUB-EUR

Fixing rate June 09 vs Dec 08Currency


11,8 11,5

5,4 5,6

6,2 6,72,1 2,3

0

10

20

30

Year-end 2008 Q2 2009

OtherBalticsRussiaEUR

NET ASSETS IN FOREIGN CURRENCIES

Total 25.5 bSEK Total 26.1 bSEK


CASH FLOW FOR Q2 2009

412-168244

921-36885

Cash Flow after CAPEXAcquisition and sale of shares and participations, net

-1,446-1,078CAPEX

1,858-381

1532,086

Q2 08

INVESTING ACTIVITIES

1,999CASH FLOW FROM OPERATING ACTIVITIES63Changes in working capital

-1242,060

OPERATING ACTIVITIESTaxes paidCash flow from operations, other

Q2 09SEK million


CASH FLOW FOR H1 2009

920-634286

1,603-133

1,470

Cash Flow after CAPEXAcquisition and sale of shares and participations,net

-2,445-2,227CAPEX

3,365-299

-1673,831

H1 08

INVESTING ACTIVITIES

3,830CASH FLOW FROM OPERATING ACTIVITIES458Changes in working capital

-5803,952

OPERATING ACTIVITIESTaxes paidCash flow from operations, other

H1 09SEK million


NEW DEFINITION OF A PRE-PAID CUSTOMERN

EW

DE

FIN

ITIO

N

OU

R G

OA

L

Definition alignment; apply the same definition to all our countries

”An active pre-paid customer is a customer that has a

refillable active account; and has either refilled or done

an active transaction during the last 90 days”


CUSTOMER DEFINITION – NEW RULE

-40-8,612 months from last refillNetherlands

-14-3,212 months from last refillFrance

5532,7Total

-227-29,4Average of 12 months from last refillCroatia

-12-1,1Average of 4 months from last refillLatvia

-181-9,510 months from last refillLithuania

-32

1,261

-2

-200

-6,6

11,3

-0,4

-5,8

Absolute impact

(in thousands)

7 months from last refill

3 months from last refill

6 months from last refill or usage

6 months from last refill or usage

Old definition

Estonia

Russia

Norway

Sweden

Relative impact

(%)Country


0

5 000

10 000

15 000

20 000

25 000

Q2 07

Q4 07

Q2 08

Q4 08

Q2 09

00,511,522,533,5

Net debt incl. JV

Net debt

Net debt/ EBITDAincl. JV 2008Net debt/ EBITDA2008

• Net debt amounted to SEK 5,441 million in Q2 2009– 0.6 times FY 2008 EBITDA– 0.9 times FY 2008 EBITDA including guarantees to JV

GROUP FINANCIAL PROFILE


NET INTAKE PER SEGMENT

-600

-400

-200

0

200

400

600

800

1000

Q108

Q208

Q308

Q408

Q109

Q209

Fixed telephonyFixed broadbandMobile

• Russia is the growth driver in net intake adding 478,000 new customers• Mobile customer base increasing by 524,000 new users


GROUP Q2 2009 MOBILE

• Total number of mobile customers 20.7 million Q2 2009– New pre-paid definition adding 553 000 customers in the reporting

0

5 000

10 000

15 000

20 000

25 000

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09

Mobile InternetPre paid voicePost paid voice

0.2 million16.7 million

3.8 million


MoU AND ARPU DEVELOPMENT

010203040506070

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09170175180185190195200205210215220

ARPU MoU

SWEDEN RUSSIA

175180185190195200205210215220225

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09195200205210215220225230235240

ARPU MoU

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


GROUP Q2 2009 NET SALES

0

2 000

4 000

6 000

8 000

10 000

12 000

Q108

Q208

Q308

Q408

Q109

Q209

OtherFixed telephonyFixed broadbandMobile

• Mobile net sales SEK 6,457 million, up 5 percent


GROUP Q2 2009 EBITDA

-500

0

500

1 000

1 500

2 000

2 500

3 000

Q108

Q208

Q308

Q408

Q109

Q209

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%Other

Fixed telephony

Fixed broadband

Mobile

Group EBITDAmargin

• Group EBITDA margin 24 percent– Lithuania delivering new record EBITDA margin of 39 percent – Further improved performance in the Dutch and Austrian fixed broadband operations


MOBILE Q2 2009 EBITDA

0200400600800

1 0001 2001 4001 6001 8002 000

Q108

Q208

Q308

Q408

Q109

Q209

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

Mobile

Mobile EBITDAmargin

• Mobile EBITDA margin 27 percent– Russia EBITDA margin 40 percent in mature regions and 35 percent in all regions


FIXED BROADBAND Q2 2009 EBITDA

-200

-100

0

100

200

300

Q108

Q208

Q308

Q408

Q109

Q209

-15,00%

-10,00%

-5,00%

0,00%

5,00%

10,00%

15,00%

20,00%

Fixed broadband

Fixed broadbandEBITDA margin

• Fixed broadband EBITDA margin 14 percent– Excellent performance in Tele2 Netherlands driven by continued success in the B2B and

consumer segment – The Austrian operations benefiting from the restructuring process


FIXED TELEPHONY Q2 2009 EBITDA

0

100

200

300

400

500

Q108

Q208

Q308

Q408

Q109

Q209

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

Fixed Telephony

Fixed telephonyEBITDA margin

• Fixed telephony EBITDA margin 27 percent– Focus on maintaining relative performance


GROUP Q2 2009 EBIT

-1 000

-500

0

500

1 000

1 500

2 000

Q108

Q208

Q308

Q408

Q109

Q209

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

12,00%

14,00%

16,00%Other

Fixed telephony

Fixed broadband

Mobile

Group EBITmargin

• Group EBIT margin 15 percent excluding one-off items• Improved operational performance in mobile lifting EBIT performance


GROUP Q2 2009 CAPEX

• Group Capex SEK 1,085 million or 11 percent of net sales– FY 2009 expectation in the range of SEK 4,700-4,900 million, affected by FX movement

• Expansion in Russia the main driver– FY 2009 expectation in the range of SEK 1,300-1,500 million related to roll-out of new

licenses

0200400600800

1000120014001600

Q108

Q208

Q308

Q408

Q109

Q209

0,00%2,00%4,00%6,00%8,00%10,00%12,00%14,00%16,00%

OtherFixed telephonyFixed broadbandMobileCapex/sales


AGENDA





CONCLUDING REMARKS

• Record result with strong performance in all markets

• Top priorities 2H 2009 – Tele2 will continue to focus on cost discipline in all parts of the

organization – Roll-out of new regions in Russia

• Launch of up to six new regions during Q3 2009– Develop our mobile operations

• Compose a product portfolio that goes in line with the needs of our customers

– Tele2 will work harder in the corporate segment, both in the Nordic and Western European regions


Q&A


Appendix


GENERAL MARKET TRENDS IN MOBILE

• Strong customer intake

• MoU growth is offsetting price competition

• Pricing environment for basic voice fairly stable

• Good interest in Mobile Internet services


TELE2 SWEDEN MOBILE

2 950

3 000

3 050

3 100

3 150

3 200

3 250

3 300

3 350

3 400

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 090

20

40

60

80

100

120

140

Mobile subscriberNet intake

1 700

1 750

1 800

1 850

1 900

1 950

2 000

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 090,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

40,00%

Mobile net salesEBIT marg.EBITDA marg.

• Flat revenue development• Good customer intake

– Driven by Mobile Internet and post-paid voice

• 33,000 new Mobile Internet users

– Total base 218,000• MoU continue to grow, both

voice and VAS• New partnership regarding

future LTE network deployment • EBITDA 32 percent

– More traffic carried over the 3G network/SUNAB JV

– Higher intake of post-paid customers leading to increased marketing costs

• Capex– Benefiting from the JV

structure


TELE2 SWEDEN MOBILE (contd)

• Total number of mobile customers 3.2 million Q2 2009– New pre-paid definition affecting the reported number of the customer base with -200 000

0500

1 0001 5002 0002 5003 0003 5004 000

Q2 08 Q3 08 Q4 08 Q1 09 Q2 09

Mobile InternetPre paid voicePost paid voice

0.2 million1.7 million1.3 million


TELE2 NORWAY MOBILE

425

430

435

440

445

450

455

460

465

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09-10

-5

0

5

10

15

20

25


580

590

600

610

620

630

640

650

660

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09-4,00%

-2,00%

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

12,00%

Mobile net salesEBITDA marg.

• Tele2 staying the price leader despite tough market conditions

• Customer intake 2,000 in Q2 2009

• Improvement EBITDA development:

– Efforts to bring costs down together with;

– a continued focus on improving the quality of the overall customer stock

• Network Norway JV affecting EBIT by SEK 16 million


TELE2 RUSSIA MOBILE

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 090

100

200

300

400

500

600

700


0

500

1 000

1 500

2 000

2 500

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 0929,00%

30,00%

31,00%

32,00%

33,00%

34,00%

35,00%

36,00%

37,00%


• Revenue growth 14 percent in SEK

• More than 12 million customers– Net intake in the quarter

478,000

• Stable ARPU development despite economic weakness

• Roll-out of new GSM licenses will accelerate in 2H 2009

• Improved network quality and data usage through the introduction of EDGE technology


TELE2 BALTIC MOBILE

3 050

3 100

3 150

3 200

3 250

3 300

3 350

3 400

3 450

3 500

3 550

3 600

Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09-60

-40

-20

0

20

40

60


0

200

400

600

800

1000

1200

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 0926,00%

28,00%

30,00%

32,00%

34,00%

36,00%

38,00%

Latvia net salesLithuania net salesEstonia net salesEBITDA marg.

• Challenging economic environment

– Lithuania and Estonia relatively stable development

– Fierce price competition in Latvia

• Robust EBITDA development despite current economic climate

– Lithuania 39 percent EBITDA margin

• Price leadership creating opportunities

– Focus on higher ARPU segments and enterprise customers


TELE2 CROATIA MOBILE

0

100

200

300

400

500

600

700

800

900

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 090

10

20

30

40

50

60

70

80


0

50

100

150

200

250

300

350

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09-70,00%

-60,00%

-50,00%

-40,00%

-30,00%

-20,00%

-10,00%

0,00%


• The Croatian operations developing according to plan

• Good EBITDA improvement in the quarter

• Opex affected by higher marketing spending and acquisition costs


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Quarterly report (Q2) 2009

Investor Relations