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Q4 2015 presentation
This document provides a quarterly report for Tele2AB for the fourth quarter of 2015. It highlights that Tele2 and Comviq were awarded for most satisfied customers in 2015. It also notes that 4G coverage is now at 90% in major markets and the commercial launch of the Dutch 4G-only network. Mobile end-user service revenue continued to grow, particularly in data monetization in the Baltic region. EBITDA was up 6% in Sweden while the Challenger program remains on track to achieve 1 billion in savings by 2018. Monetization of data is a key priority moving forward.
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Q4 2015 presentation
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- 2. Highlights from thequarter Winning People & Culture Value Champion Step-Change Productivity Focused Technology Choices Tele2 and Comviq awarded for most satisfied customers in 2015 Shared Operations established in India and expanding in Latvia Post-quarter end introducing new Leadership Team members Commercial launch of our Dutch 4G-only network 4G coverage now at 90% in all major markets Croatia network swap complete and ready for 4G launch Mobile-end user service revenue continues to grow Solid quarter for Swedish consumer postpaid Data monetization particularly strong in the Baltic region Sweden mobile EBITDA up 6% and margin improved to 28% JV with Kazakhtelecom announced Challenger on track for 1 bn savings target in 2018 2
- 3. Monetization of datais our key priority *FX adjusted **Average data usage excludes traffic on MVNO networks. Year-on-year growth, Tele2 Group Mobileend-userservice revenue MobileEBITDA Averagedatausage permobilecustomer** +2% (+5%*) -4% (-4%*) +94% 3
- 4. 6.5% 8.7% 6.7% 6.7% 8.1% 6.6% 9.6% 7.4% 5.2% 2.4% Q3 13Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Continued growth in mobile end-user service revenue Year-on-year growth for mobile end-user service revenue, Tele2 Group Average +6.8% 4
- 5. 5.4% 7.7% 5.9% 6.0% 6.8% 5.2% 5.6% 3.6% 3.3% 4.8% Q3 13Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Continued growth in mobile end-user service revenue FX adjusted Year-on-year growth for mobile end-user service revenue, Tele2 Group Average +5.9% 5
- 6. Kazakhstan: -10% (25% exFX) Latvia: +1% Lithuania: +8% Sweden: +0.3% Netherlands: +4% Austria: -7% Croatia: +1% Germany: -12% Estonia: +10% Market year-on-year development *Excluding non-recurring items in Q4 2015 Austria = total net sales Mobile end-user service revenue* Data usage growth (Excluding MVNO networks) +121% Q4 14 Q4 15 Sweden Netherlands Kazakhstan CEE 6
- 7. Tele2 Sweden Net sales (SEKmillion) EBITDA and EBITDA margin Q4 (SEK million) Total revenue impacted by lower equipment sales and decline within fixed and B2B. Large enterprise continued to show stable growth, while SME declined due to price aggression in the market Consumer mobile postpaid grew mid-single digit, driven by Comviq Data monetization continues with mobile margin up from 26% to 28% for the quarter Q4 Highlights 3 373 3 299 Q4 14 Q4 15 -2% +8% EBITDA and EBITDA margin YTD (SEK million) 880 946 26% 29% 0% 10% 20% 30% 40% 50% 60% Q4 14 Q4 15 0 100 200 300 400 500 600 700 800 900 1,000 3 612 3 844 29% 30% 0% 10% 20% 30% 40% 50% 60% FY 14 FY 15 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 +6% 7
- 8. Tele2 Sweden Churn Tele2brand Mobile net intake (thousands) Tele2.0 provides more flexibility, transparency and simplicity which has led to increased loyalty and lower churn Customer net intake in the quarter continued to grow across all segments, particularly in mobile postpaid Comviq and Tele2 awarded no 1 and no 2 respectively for the most satisfied residential customers, by the Swedish Quality Index. Tele2 awarded no 1 in B2B fixed telephony and broadband Q4 Highlights Q4 14 Q4 15 -20% -58 27 Q4 14 Q4 15 -60 -50 -40 -30 -20 -10 0 10 20 30 Most satisfied customers award Q4 15 8
- 9. Tele2 Baltics Net sales (SEKmillion) EBITDA and EBITDA margin Q4 (SEK million) EBITDA and EBITDA margin YTD (SEK million) Q4 Highlights 745 815 Q4 14 Q4 15 265 257 36% 32% 0% 10% 20% 30% 40% 50% 60% Q4 14 Q4 15 0 50 100 150 200 250 300 +9% -3% 973 989 33% 32% 0% 10% 20% 30% 40% 50% 60% FY 14 FY 15 0 200 400 600 800 1000 1200 +2% Monetization driven by data centric pricing and trade-ups in data buckets Lithuania grew 8%, and Estonia grew 10% in mobile end-user service revenue Customers moving into towards higher value postpaid, and prepaid declining as expected Excluding gain from sale of frequency licence in Q4 2014, EBITDA growth YoY was 5% First operator in the region to test triple carrier aggregation LTE advanced with speeds above 300Mbps9
- 10. Tele2 Netherlands Net sales (SEKmillion) EBITDA and EBITDA margin Q4 (SEK million) Q4 Highlights Official launch of 4G-only network negatively impacted the results for the quarter Gross intake higher since launch however net intake impacted by higher churn due to competitive pressure in 3G SIM-only market B2B announced significant new deal from a strong pipeline First pilots with VULA high speed broadband services commenced in the quarter 1 432 1 512 Q4 14 Q4 15 173 35 12% 2% 0% 5% 10% 15% 20% 25% Q4 14 Q4 15 0 20 40 60 80 100 120 140 160 180 200 +6% -80% EBITDA and EBITDA margin YTD (SEK million) 903 445 17% 8% 0% 10% 20% 30% 40% 50% 60% FY 14 FY 15 0 100 200 300 400 500 600 700 800 900 1000 -51% 10
- 11. Tele2 Netherlands Outdoor populationcoverage now at 95% Spontaneous Brand Awareness (Memo2) Q4 Highlights 4G Network came out on top in 3 out of 6 categories on TV show ”Kassa”, one of the largest consumer review TV shows in the Netherlands. Outdoor coverage is now at 95% Spontaneous Brand Awareness increased 10% during 5 weeks following launch Handset sales are up 50% since launch Measures underway to reduce churn and attract higher value customers Share of switchers, postpaid handset segment (GFK) 16.7% 24.6% 28.0% Jan-Oct 15 Nov 15 Dec 15 34% 34% 36% 39% 43% 44% 45 46 47 48 49 50 51Nov 15 Dec 15 11
- 12. Strong netsales growth of 35% due to strong customer growth and higher incoming traffic Continued positive net intake of 38K EBITDA in the quarter impacted by intensified competition Final regulatory approval received. JV deal closing anticipated in Q1 2016. Integration planning well underway Government announced technological neutrality and issued additional spectrum for LTE in 800MHz and 1800MHz Tele2 Kazakhstan Net sales Q4 (KZT million) 9 432 12 687 Q4 14 Q4 15 +35% EBITDA and EBITDA margin Q4 (KZT million) -97% Q4 Highlights EBITDA and EBITDA margin YTD (KZT million) 1 133 1 372 3% 3% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% FY 14 FY 15 0 200 400 600 800 1000 1200 1400 1600 +21% 433 12 5% 0% -10% -5% 0% 5% 10% 15% 20% Q4 14 Q4 15 0 50 100 150 200 250 300 350 400 450 500 12
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- 14. Financial highlights Mobile end-user servicerevenue (SEK billion) 3.3 EBITDA (SEK billion) 1.3 CAPEX (SEK billion) 1.2 Net sales (SEK billion) 6.9 Q4 2015 % Change +2% -5% +19% +1% 3.2 1.4 1.0 6.9 Q4 2014 14
- 15. Financial highlights Mobile end-user servicerevenue (SEK billion) 13.2 EBITDA (SEK billion) 5.8 CAPEX (SEK billion) 4.2 Net sales (SEK billion) 26.9 FY 2015 % Change +6% -3% +23% +3% 12.5 5.9 3.5 26.0 FY 2014 Ordinary dividend (SEK billion) 2.4 +10%2.2 15
- 16. Mobile end-user servicerevenue Tele2 Group (SEK million) Development per market (SEK million) 3,205 3 205 3 184 3 324 3 422 3 282 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 +2% 3 205 3 282 -15 29 102 -27 -12 Q4 14 Sweden Baltics Netherlands Kazahkstan RoW Q4 15 16
- 17. EBITDA Tele2 Group (SEK million) 1,412 Developmentper market (SEK million) 1 412 1 428 1 393 1 599 1 337 20.5% 21.9% 21.1% 23.5% 19.3% 600 800 1000 1200 1400 1600 1800 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% EBITDA margin 1 412 1 337 66 -8 -138 -22 27 Q4 14 Sweden Baltics Netherlands Kazahkstan RoW Q4 15 -5% 17
- 18. CAPEX Tele2 Group (SEK million) Developmentper market (SEK million) 1 030 938 1 134 932 1 223 15.0% 14.4% 17.2% 13.7% 17.6% 300 500 700 900 1,100 1,300 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% CAPEX / Net sales 1 030 1 223 8 20 46 76 43 Q4 14 Sweden Baltics Netherlands Kazahkstan RoW Q4 15 +19% 18
- 19. Free cash flow Totaloperations Tele2 Group (SEK million) Development (SEK million) Free cash flow = Cash flow from operating activities and CAPEX paid 238 -96 -268 169 -291 -400 -300 -200 -100 0 100 200 300 400 500 600 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 -277 238 -75 -77 31 -136 -29 34 -291 Q4 14 EBITDA Interest etc Taxes Working capital CAPEX Discontinued Operations One-off items Q4 15 -222% 19
- 20. Debtpositionandfinancialleverage Pro forma netdebt / EBITDA 12 m rolling 7.9 3.3 10.1 9.6 9.7 2.4 0.0 0.5 1.0 1.5 2.0 0.0 2.5 5.0 7.5 10.0 12.5 15.0 Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Pro forma net debt Dividend, announced Pro forma net debt to EBITDA SEK billion Financial leverage 20
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- 22. ChallengerProgramprogressing 2015 30% 40% 0% 12% 60% 80% 20% 25% 30% 67% 4% 15% 20182014 Simplify % of productsharmonized on shared platforms Transform % of staff in shared operations Consolidate % reduction in IT OpEx as share of revenue Discipline % of spend strategically sourced & procured 22
- 23. Initiativescommencedin2015 Product Harmonization Application Rationalization ICB & Roaming Return on Marketing Investment Field Force outsourcing Transmission optimization Customer Service offshoring Finance back office nearshoring Germany restructuring Simplify Transform Consolidate Discipline 23
- 24. Q4 ChallengerProgramroadmap 2015 20162014 20172018 Investment phase Benefits phase 24
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- 26. Financial guidance 2016 Netsales (SEK billion) EBITDA (SEK billion) 26 – 27 4.6 – 5.0 CAPEX (SEK billion) 3.7 – 4.1 Mobile end-user service revenue Mid-single digit % growth 26
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- 28. Key priorities movingforward Maximize our dual brand strategy strength in Sweden Accelerate next phase of Netherlands commercial launch JV integration in Kazakhstan Commercialize and monetize 4G investments in Baltics, Croatia Continuing execution on the Challenger Program New Leadership Team established to take business forward Winning People & Culture Value Champion Step-Change Productivity Focused Technology Choices 28
- 29. Tele2’sWay2Win The Tele2 Way Weare challengers, fast-movers and will always offer our customers what they need for less We will be champions of customer value in everything we do How we win Focused Technology Choices Value Champion Step-Change Productivity Winning People & Culture Vision Mission Where we play Mobile access Our current footprint Residential and Business M2M & IoT Responsible Challenger 29
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