Q1 2016 presentation

FIRSTQUARTER 2016April 21st, 2016

Tele2 AB

Delivering on our long term strategy

Winning People & Culture

Value Champion

Step-Change Productivity

Focused Technology

Choices

• 4G available across our footprint• 4G customer base significantly increased in Netherlands• VoLTE switched on

• Mid-single digit mobile end-user service revenue growth• Sweden Consumer continues to grow• Strong performance in the Baltic region

• Challenger program on track • Kazakhstan JV synergy plan progressing well• Virtualization and cloudification of Network & IT underway

• 1000 new Altel employees embracing the Tele2 Way• Welcome Lars Nordmark, Group CFO

2

Group highlights – Q1 2016

Q1 2016 % Change Reported

LFL is constant currencies and pro forma for Altel

% ChangeLFL

Mobile end-user service revenue(SEK billion)

3.17 -1% +4%

EBITDA(SEK billion) 1.23 -14% -14%

Net sales(SEK billion) 6.45 -1% +2%

3

Sweden – FinancialsNet sales(SEK million)

Mobile end-user servicerevenue (SEK million)

– Net sales declined mainly due to lower fixed revenues and lower handset sales

– Mobile end-user service revenue continued to be impacted primarily by price pressure in B2B SME segment

– EBITDA impacted by investment into sales and marketing activities

Q1 Highlights

EBITDA and EBITDA margin(SEK million)

1 809 1 829 1 889 1 841 1 797

Q1 15 Q2 15 Q3 15 Q4 15 Q1 160

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

976 9081 014 946 894

31% 29% 33% 29% 29%

0%

10%

20%

30%

40%

50%

60%

Q1 15 Q2 15 Q3 15 Q4 15 Q1 160

200

400

600

800

1,000

1,2003 130 3 101 3 100 3 299 3 053

Q1 15 Q2 15 Q3 15 Q4 15 Q1 160

500

1,000

1,500

2,000

2,500

3,000

3,500

-1%-2% -8%

4

Sweden – Continuing growth in ConsumerConsumer postpaid end-user services revenue

Share of Tele2 intake with bundle >0.5GB

– Total Consumer grew 3% driven by strength in prepaid and successful execution of our dual brand strategy

– Tele2 customer intake continues to develop in the higher value buckets

– Geographic 2G/4G coverage now at 86%, on track towards 90% target

– Customer satisfaction (CSAT) has increased to best-in-class levels, 85%

Q1 Highlights

Geographic coverage2G/4G

Q1 15 Q1 16

70%72%

77%

Jan Feb Mar

+1.3%

77%

86%

Q1 15 Q1 16

5

Baltics – Financials

Q1 Highlights

Net sales(SEK million)

EBITDA and EBITDA margin(SEK million)

Mobile end-user service revenue (SEK million)

444 470 488 476 468

Q1 15 Q2 15 Q3 15 Q4 15 Q1 160

100

200

300

400

500

600

231 238263 257 246

32% 31% 32% 32% 32%

0%

10%

20%

30%

40%

50%

60%

Q1 15 Q2 15 Q3 15 Q4 15 Q1 160

50

100

150

200

250

300

719 767 832 815 770

Q1 15 Q2 15 Q3 15 Q4 15 Q1 160

100

200

300

400

500

600

700

800

900

– Net sales and mobile end-user service revenue growth driven by continued positive data monetization

– Revenue growth is filtering through to strong EBITDA development

– Lithuania is particularly strong, mobile end-user service revenue up 8% and EBITDA up 14%

+5%+7% +6%

6

Baltics – Strong performanceASPU development Share of 4G capable

smartphones in base

Q1 Highlights

4G population coverage

– Strong data monetization driven by prepaid to postpaid transition, increasing penetration of 4G handsets, and data centric pricing

– Population coverage continues to expand

– Successfully acquired 900/1800 Mhz spectrum band license in Lithuania.

56%

95%

Q1 15 Q1 16Q1 15 Q1 16

10%

25%

Q1 15 Q1 16

+8%

7

Netherlands – Financials

Q1 Highlights– Mobile end-user service revenue growth reflects improved intake building through the quarter

– Momentum was stronger in March after the launch of the iPhone and new SIM-only propositions

– EBITDA impacted as expected by costs associated with mobile growth and network rollout partly offset by property one-off (+SEK 73M)

Net sales(SEK million)

EBITDA (SEK million)

Mobile end-user service revenue (SEK million)

305 332 364403

322

Q1 15 Q2 15 Q3 15 Q4 15 Q1 160

50

100

150

200

250

300

350

400

450

141 147122

35

-31

Q1 15 Q2 15 Q3 15 Q4 15 Q1 16

-35

-15

5

25

45

65

85

105

125

145

165

1 402 1 390 1 440 1 512 1 441

Q1 15 Q2 15 Q3 15 Q4 15 Q1 160

200

400

600

800

1,000

1,200

1,400

1,600

+6%+3% -122%

8

Netherlands – Gaining momentumSpontaneous brand awareness & Brand consideration (Memo2)

Share of total postpaid new(GfK)

Data usage on own network

Q1 Highlights– Brand Awareness and Consideration are trending positively since launch

– Significant increase in share of total postpaid new contracts

– Good progress in data on-loading driven by strong network coverage of 97% outdoor and 78% indoor

– At the end of the quarter the first customers started to use VoLTE, making Tele2 the first 4G-only operator in the world

27%

61%

Pre-launch Mar 164G

34%

40%41%

52%

Pre-launch Mar 16

Awareness Consideration

12%

25%

Pre-launchOct 15

Mar 16

9

– JV in place since Feb 29th, integration on track

– Mobile end-user service revenue growth due to higher customer base

– Net sales growth lower than service revenue due to lower handset sales

– EBITDA impacted by business expansion costs and translation impacts on payables

Kazakhstan – Financials

Q1 Highlights

LFL is constant currency and pro forma for Altel

Net sales, LFL (SEK million)

EBITDA, LFL (SEK million)

Mobile end-user service revenue, LFL (SEK million)

284324 342 359 371

Q1 15 Q2 15 Q3 15 Q4 15 Q1 160

50

100

150

200

250

300

350

400

14

-13

25

-34

12

Q1 15 Q2 15 Q3 15 Q4 15 Q1 16

-35

-25

-15

-5

5

15

25

35

386480

557632

487

Q1 15 Q2 15 Q3 15 Q4 15 Q1 160

100

200

300

400

500

600

700

+31%+26%

10

Kazakhstan – JV integration progressingCustomer base, LFL(thousands)

Average Price/GB development

Q1 Highlights

4G coverage Tele2 customers

LFL is pro forma for Altel

– National roaming agreement between Altel and Tele2 in place, 4G and greater coverage now available for the combined customer base

– Customer base increase due to strong price leadership positions of both Tele2 and Altel

– Pricing discipline going forward, new price plans for Altel in place since early April

4 737

6 298

Q1 15 Q1 16

77%

Unlimitedtariff plans

New tariffs

75 168KZT KZT

11

Challenger Program progressing

Simplify% of products harmonized on

shared platforms

Discipline% of spend strategically sourced &

procured

Consolidate% of reduction in IT OpEx as share

of revenue

Transform% of staff in Shared Operations

2016 target 2018 targetBaseline

30% 40% 60%

40% 75% 80%

0% 5% 20%

12% 18% 25%

Progress in the quarter

Handset Optimization Program is delivering campaign benefits as well as working capital improvements

Virtualization and cloudification of network & IT announced

Germany restructuring flowing through New organization model enabling more

economies of scale

Good progress in Estonia and Croatia on product portfolio simplification

12

Financial Overview

3 1843 168-12

2417

-50 -8

Q1 15 Sweden Baltics NL KZ RoW Oth Q1 16

Mobile end-user service revenue

Tele2 Group(SEK million)

3 1843 324 3 422

3 282 3 168

Q1 15 Q2 15 Q3 15 Q4 15 Q1 16

-1%

Development per market(SEK million)

13

14

1 428

1 226

-82

15

-1726 32

-1


EBITDA


1 428 1 393

1 599

1 337

1 226

21.9% 21.1% 23.5%19.3% 19.0%

600

800

1000

1200

1400

1600

1800

Q1 15 Q2 15 Q3 15 Q4 15 Q1 160.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

EBITDA margin

-14%


15

CAPEX


938

1 134

932

1 2231 154

14.4% 17.2% 13.7%17.6% 17.9%

300

500

700

900

1,100

1,300

Q1 15 Q2 15 Q3 15 Q4 15 Q1 160.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

CAPEX / Net sales

+23%


938

1 154

59

107

118

-400

-28


16

Free cash flowTotal operations


Development (SEK million)

Free cash flow = Cash flow from operating activities and CAPEX paid

-96

-268

169

-291

-154

-400

-300

-200

-100

0

100

200

300

400

500

600

Q1 15 Q2 15 Q3 15 Q4 15 Q1 16

-35

-96

-202

13548

158

-137 -25-154

Q1 15 EBITDA Interest etc Taxes Working capital CAPEX One-off items DiscontinuedOperations

Q1 16

-60%

17

Debt position and financial leverageEconomic net debt to EBITDA 12 m rolling

3.5

10.3 9.8 9.99.4

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

0.0

2.5

5.0

7.5

10.0

12.5

Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016

Economic net debt Dividend, announced Economic net debt to EBITDA

Economic net debt is defined as net debt excluding liabilities from Kazakhtelecom and liabilities guaranteed by Kazakhtelecom

1.70

LeverageSEK billion

18

Financial guidance 2016

Net sales(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

19

Summary

Key priorities moving forward

Regain momentum in Sweden

Commercialize and monetize 4G investments in Baltics/Croatia

Accelerate growth in Netherlands

Successful integration of Altel and pricing discipline

Execute on Challenger Program


Value Champion


Focused Technology

Choices

21

Tele2’s Way2Win

The Tele2 Way

We are 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



Vision

Mission

Where we play

Mobile access

Our current footprint

Residential and Business

M2M & IoT

Responsible Challenger

25

THEEND