Tele2 Ab Class A · OMXSTO:TEL2_A
Tele2 Ab Class A — Q3 2010 Earnings Presentation
52 slides from Tele2 Ab Class A's earnings presentation, Oct 20, 2010
Slide 1: Third Quarter 2010
THIRD QUARTER 2010 October 20 2010
Slide 2: Agenda
AGENDA About Q3 2010 Financial review Guidance and Concluding remarks 2 2010-10-20 Third quarter 2010
Slide 3: Highlights Q3
HIGHLIGHTS Q3 • Group – Total customer base amounting to more than 30 million customers. Net customer intake for the group of almost 1.3 million – Net sales grew by 2 percent. Currency-adjusted net sales grew by 6 percent, driven by mobile sales – EBITDA grew by 13 percent. Currency-adjusted EBITDA
Slide 4: Highlights Tele2 Sweden
HIGHLIGHTS TELE2 SWEDEN • Increased mobile revenue growth to 10 percent • Adding 103,000 mobile customers • Mobile EBITDA margin 34 (34) percent Mobile net sales Mobile YoY net sales growth Postpaid Prepaid EBITDA-margins 120 40% 2300 12% 100 (SEK Million) 2200 10% (thousands) 80 35% 2100 8% 60 2000
Slide 5: Shift towards smart phones
SHIFT TOWARDS SMART PHONES Top 10 phone sales (Aug- • Smartphones demanded by mass market Sep) – Shift driven by increased variety of smartphones combined with an increased awareness of the 1 iPhone4 possibilities of a mobile internet access Sony Ericsson X10 Mini 2 Pro 3 iPhone 3GS 4 Samsung Galaxy
Slide 6: Highlights Tele2 Russia
HIGHLIGHTS TELE2 RUSSIA Kaliningrad • Third and fourth new regions now EBITDA break-even Tula Orel • 1,170,000 (1,100,000) new Tomsk customers in Q3 2010 New regions EBITDA - New regions EBITDA - Old regions EBITDA - Total margin Net Intake - New regions 1000 37% Net Intake - Old regions 1250 800 36
Slide 7: Highlights Tele2 Baltic Region
HIGHLIGHTS TELE2 BALTIC REGION • Stabilizing economy leading to better operational environment • Strong net intake, adding 55,000 (28,000) customers in the region 58 Net intake 48 Estonia Lithuania Latvia 38 500 EBITDA CAPEX EBITDA - CAPEX 28 18 400 8 -2 300 (thousands) (SEK million) -12 Q2 09 Q3 09
Slide 8: Highlights Tele2 Croatia
HIGHLIGHTS TELE2 CROATIA • Next goal is to deliver positive free cash flow within a year • 81,000 (70,000) new customers added in Q3 10 82 Net intake 72 20 EBITDA 62 10 0 52 42 SEK Million -10 -20 32 -30 22 -40 12 -50 2 -60 -8 -70 -18 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10
Slide 9: Highlights Tele2 Kazakhstan
HIGHLIGHTS TELE2 KAZAKHSTAN • Preparing for re-launch under Tele2 brand 1H 2011 • Customer stock of 218 000 in Q3 2010. 18,000 new customers added in Net intake 2010 September 20 10 0 -10 -20 April Maj Jun Jul Aug Sep 9 2010-10-20 Third quarter 2010
Slide 10: Highlights Tele2 Western Europe
HIGHLIGHTS TELE2 WESTERN EUROPE • Netherlands - BBned acquisition completed • Germany - Record high EBITDA margin in fixed telephony of 46 percent EBITDA contribution Netherlands Austria Germany Netherlands Austria Germany 700 • Austria 700 600 600 - Continued good progress in 500 500 (SEK million)
Slide 11: Agenda
AGENDA About Q3 2010 Financial review Guidance and Concluding remarks 11 2010-10-20 Third quarter 2010
Slide 12: Q3 2010 Group Results
Q3 2010 GROUP RESULTS SEK million Q3 10 Q3 09 Change % Net Sales 9,998 9,829 2% EBITDA 2,751 2,441 13% - EBITDA margin (%) 28% 25% Depreciation and joint venture -876 -924 - Depreciation of Net sales (%) 9% 9% One-off items 17 116 EBIT 1,892 1,633 Normalized EBIT 1875 1517 - Normalized EBIT margin (
Slide 13: Taxes
TAXES Taxes in income statement YTD Sep 10 Q3 2010 Q2 2010 Q1 2010 Normal -1,128 -441 -348 -339 One-Off 976 1049 -73 - Total -152 608 -421 -339 Taxes in cash flow YTD Sep 10 Q3 2010 Q2 2010 Q1 2010 Normal -580 -152 -195 -233 • SEC tax dispute: Oral hearing will take place in the end of November, the
Slide 14: Currency Movements (vs SEK)
CURRENCY MOVEMENTS (VS SEK) YTD Avarage 2010 vs 2009 Q3 2010 Q2 2010 Q1 2010 EUR -10% -10% -9% RUB 0,5% +/- 0 -2% Fix rate vs 31/12-2009 Q3 2010 Q2 2010 Q1 2010 EUR -12% -8% -6% RUB -7,5% 3% 1% • EUR/RUB pegged currencies approximately: – 38% of sales and – 33% of EBITDA 14 2010-10-20 Third quarter
Slide 15: Cash Flow for Q3 2010
CASH FLOW FOR Q3 2010 SEK million Q3 10 Q3 09 OPERATING ACTIVITIES Cash flow from operations, less paid taxes 2,733 2,499 Taxes paid -152 -98 Changes in working capital 39 186 CASH FLOW FROM OPERATING ACTIVITIES 2,620 2,587 INVESTING ACTIVITIES CAPEX -923 -1,065 Cash Flow after CAPEX 1,697 1,522 Acq
Slide 16: Group Financial Profile
GROUP FINANCIAL PROFILE Net debt Net debt incl. JV Net debt/ EBITDA 2009 Net debt incl. JV/ EBITDA 2009 14 1,6 BSEK 12 1,4 10 1,2 8 1 0,8 6 0,6 4 0,4 2 0,2 0 0 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 16 2010-10-20 Third quarter 2010
Slide 17: ROCE
ROCE 25,0% 24,0% 23,0% 22,0% 21,0% 20,0% 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 Q4 Q1 Q2 Q3 2007 2008 2009 2010 17 2010-10-20 Third quarter 2010
Slide 18: Group EBITDA
GROUP EBITDA Mobile Fixed broadband Fixed telephony Other Group EBITDA margin 3 000 30% 2 500 28% 2 000 (SEK million) 1 500 26% 1 000 24% 500 22% 0 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 -500 20% 18 2010-10-20 Third quarter 2010
Slide 19: Group Mobile EBITDA
GROUP MOBILE EBITDA Mobile EBITDA on own infrastructure Mobile EBITDA (MVNO) Mobile EBITDA margin on own infratsructure Total mobile EBITDA margin 2 500 34% 2 000 32% 30% (SEK million) 1 500 28% 1 000 26% 24% 500 22% 0 20% Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 19 2010-10-20 Third quarter 2010
Slide 20: MoU and ARPU Development
MoU AND ARPU DEVELOPMENT Russia Sweden 60 240 220 260 240 50 220 200 SEK SEK 220 180 40 200 200 160 180 30 180 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 ARPU MoU ARPU MoU • Robust ARPU development – Swedish and Russian ARPU grew more than 8 percent in one quarter 20 201
Slide 21: Agenda
AGENDA About Q3 2010 Financial review Guidance and Concluding remarks 21 2010-10-20 Third quarter 2010
Slide 22: Tele2 Going Forward
TELE2 GOING FORWARD • Best Deal position • Targeting a long-term mobile EBITDA margin on own infrastructure of at least 35 percent • All operations should have the ambition of reaching ROCE of at least 20 percent • The capability to reach a top 2 position, in terms of customer market share, in an in
Slide 23: Group Outlook (Changed)
GROUP OUTLOOK (CHANGED) • Tele2 forecasts a corporate tax rate of approximately 22 percent excluding one-off items in 2010. The tax payment will affect cash flow by approximately SEK 800 million in 2010 • The oral hearing of the SEC tax dispute is expected to be conducted the 26 of November and a ve
Slide 24: Sweden Outlook (Unchanged)
SWEDEN OUTLOOK (UNCHANGED) • Tele2 will continue to target the postpaid segment, which in the longer term will lead to: – Increased ARPU – Lower churn • In the short term, this strategy will lead to higher total acquisition costs resulting in: – An EBITDA margin in the range of 33-35 percent dependi
Slide 25: Russia Outlook (Changed)
RUSSIA OUTLOOK (CHANGED) • Subscriber base should be able to reach 19-20 million by YE 2011 • Maintain ARPU growth at 5 percent by 2011 • EBITDA 2010-2011 – Old regions’ EBITDA margin should stabilize at 45 percent – Most New regions’ EBITDA will break-even by 18 months (2 years) from launch – Russi
Slide 26: Kazakhstan Outlook (Unchanged)
KAZAKHSTAN OUTLOOK (UNCHANGED) • Subscriber base should aim to reach 400,000-450,000 by YE 2010 • Blended ARPU should be in the range of SEK 40-45 • EBITDA should approximately be: - SEK -250 million in 2010 - SEK -400 to -450 million in 2011 • Accumulated Capex should be in the range of SEK 1,400-1
Slide 27: Croatia Outlook (New)
CROATIA OUTLOOK (NEW) • Tele2 Croatia will reach free cash flow break-even by 2H 2011 27 2010-10-20 Third quarter 2010
Slide 28: Concluding Remarks
CONCLUDING REMARKS Nordic 2010 an investment year • Accelerated mobile revenue • Russia growth • Kazakhstan Russia • Sweden • Record high customer intake - 4G and EBITDA - Spring Mobil Central Europe and Eurasia • Norway • Improving economy leading to - 3G stable cash flow contribution • Netherlands
Slide 29: Q&A
Q&A 29 2010-10-20 Third quarter 2010
Slide 30: Appendix A
Appendix A 30 2010-10-20 Third quarter 2010
Slide 31: Tele2 Sweden Mobile
TELE2 SWEDEN MOBILE Mobile subscribers Net intake 3 700 120 3 600 100 3 500 3 400 80 (In thousands) (In thousands) 3 300 60 3 200 3 100 40 3 000 20 2 900 2 800 0 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 31 2010-10-20 Third quarter 2010
Slide 32: Tele2 Sweden Mobile (contd)
TELE2 SWEDEN MOBILE (contd) Mobile Net sales EBITDA marg. EBIT marg. 2 300 40% 2 200 36% 2 100 (SEK million) 32% 2 000 1 900 28% 1 800 24% 1 700 1 600 20% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 32 2010-10-20 Third quarter 2010
Slide 33: Tele2 Norway Mobile
TELE2 NORWAY MOBILE Mobile subscribers Net intake 500 12 10 480 8 460 6 (In thousands) (In thousands) 440 4 420 2 0 400 -2 380 -4 360 -6 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 33 2010-10-20 Third quarter 2010
Slide 34: Tele2 Norway Mobile (contd)
TELE2 NORWAY MOBILE (contd) Mobile net sales EBITDA marg. 700 10% 9% 650 8% 7% (SEK million) 600 6% 5% 550 4% 3% 500 2% 1% 450 0% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 34 2010-10-20 Third quarter 2010
Slide 35: Tele2 Russia Mobile
TELE2 RUSSIA MOBILE Mobile subscribers Net intake 18000 1 200 16000 1 000 14000 12000 800 (In thousands) (In thousands) 10000 600 8000 6000 400 4000 200 2000 0 0 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 35 2010-10-20 Third quarter 2010
Slide 36: Tele2 Russia Mobile (contd)
TELE2 RUSSIA MOBILE (contd) Mobile net sales EBITDA marg. 38% 2 800 37% 2 400 36% 2 000 (SEK million) 35% 1 600 34% 1 200 33% 800 32% 400 31% 0 30% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 36 2010-10-20 Third quarter 2010
Slide 37: Tele2 Baltic Mobile
TELE2 BALTIC MOBILE Mobile subscribers Net intake 3600 80 3200 60 2800 40 2400 20 (In thousands) 2000 0 1600 -20 1200 -40 800 -60 400 -80 0 -100 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 37 2010-10-20 Third quarter 2010
Slide 38: Tele2 Baltic Mobile (contd)
TELE2 BALTIC MOBILE (contd) Estonia Net sales Lithuania Net sales Latvia Net sales EBITDA marg. 1200 40% 1000 800 35% (SEK million) 600 400 30% 200 0 25% Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 38 2010-10-20 Third quarter 2010
Slide 39: Tele2 Croatia Mobile
TELE2 CROATIA MOBILE Mobile subscribers Net intake 850 100 750 80 60 650 (In thousands) (In thousands) 40 550 20 450 0 350 -20 250 -40 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 39 2010-10-20 Third quarter 2010
Slide 40: Tele2 Croatia Mobile (contd)
TELE2 CROATIA MOBILE (contd) Mobile Net sales EBITDA marg. 450 5% 400 350 0% 300 (SEK million) -5% 250 200 -10% 150 100 -15% 50 0 -20% Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 40 2010-10-20 Third quarter 2010
Slide 41: Appendix B
Appendix B 41 2010-10-20 Third quarter 2010
Slide 42: Net Debt and Dividend Targets
NET DEBT AND DIVIDEND TARGETS • Shareholder remuneration – “Tele2’s intention is to pay a progressive ordinary dividend to its shareholders over the medium term” • Long-term financial leverage – “Tele2’s longer-term financial leverage, defined as the net debt /EBITDA ratio, should be in line with th
Slide 43: Appendix C
Appendix C 43 2010-10-20 Third quarter 2010
Slide 44: Financial Items Q3 2010
FINANCIAL ITEMS Q3 2010 SEK million Q3 10 Q3 09 Change External Net interest expenses -89 -111 22 Exchange rate differences, external 56 138 -82 Other financial items -40 -10 -30 -73 17 -90 Exchange rate differences, intragroup 57 182 -125 Financial items -16 199 -215 44 2010-10-20 Third quarter 201
Slide 45: Cash Flow Development
CASH FLOW DEVELOPMENT Cash flow after CAPEX Cash flow from operating activities 2 800 2 400 (SEK million) 2 000 1 600 1 200 800 400 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 45 2010-10-20 Third quarter 2010
Slide 46: Group Net Intake per Segment
GROUP NET INTAKE PER SEGMENT Mobile Fixed broadband Fixed telephony 1 500 1 300 1 100 900 (In thousands) 700 500 300 100 -100 -300 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 46 2010-10-20 Third quarter 2010
Slide 47: Group Customer Stock
GROUP CUSTOMER STOCK Group Customer Stock Mobile Fixed Broadband Fixed Telephony Group Mobile Customer Stock 30 000 Mobile Internet Postpaid voice Prepaid voice 30 000 25 000 25 000 (In thousands) (In thousands) 20 000 20 000 15 000 15 000 10 000 10 000 5 000 5 000 0 0 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10
Slide 48: Group Fixed Broadband EBITDA
GROUP FIXED BROADBAND EBITDA Fixed broadband Fixed broadband EBITDA margin 400 25% 20% 300 (SEK million) 15% 200 10% 100 5% 0 0% Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 48 2010-10-20 Third quarter 2010
Slide 49: Group Fixed Telephony EBITDA
GROUP FIXED TELEPHONY EBITDA Fixed telephony Fixed telephony EBITDA margin 500 33% 32% 31% (SEK million) 30% 400 29% 28% 27% 26% 300 25% Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 49 2010-10-20 Third quarter 2010
Slide 50: Group EBIT
GROUP EBIT Mobile Fixed broadband Fixed telephony Other Group EBIT margin 2 500 25% 2 000 20% (SEK million) 1 500 15% 1 000 10% 500 0 5% Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 -500 0% 50 2010-10-20 Third quarter 2010
Slide 51: Group Capex
GROUP CAPEX Mobile Fixed broadband Fixed telephony Other Capex/sales 1400 14% 1200 12% 1000 10% (SEK million) 800 8% 600 6% 400 4% 200 2% 0 0% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 In 2010: Tele2 forecasts a CAPEX level in the range of SEK 4,600 – 4,800 million 51 2010-10-20 Third quarter 2010
Slide 52: Third quarter 2010
52 2010-10-20 Third quarter 2010