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FOURTH QUARTER 2015 January 28 th , 2016 Tele2 AB

Q4 2015 presentation

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Page 1: Q4 2015 presentation

FOURTHQUARTER 2015January 28th, 2016

Tele2 AB

Page 2: Q4 2015 presentation

Highlights from the quarter

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

Page 3: Q4 2015 presentation

Monetization of data is our key priority

*FX adjusted**Average data usage excludes traffic on MVNO networks.

Year-on-year growth, Tele2 Group

Mobile end-user service revenue

Mobile EBITDA Average data usage per mobile customer**

+2%(+5%*)

-4%(-4%*)

+94%

3

Page 4: Q4 2015 presentation

6.5%

8.7%

6.7% 6.7%

8.1%

6.6%

9.6%

7.4%

5.2%

2.4%

Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15

Continued growth in mobile end-user service revenueYear-on-year growth for mobile end-user service revenue, Tele2 Group

Average +6.8%

4

Page 5: Q4 2015 presentation

5.4%

7.7%

5.9% 6.0%

6.8%

5.2%5.6%

3.6%3.3%

4.8%

Q3 13 Q4 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 adjustedYear-on-year growth for mobile end-user service revenue, Tele2 Group

Average +5.9%

5

Page 6: Q4 2015 presentation

Kazakhstan: -10% (25% ex FX)

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 2015Austria = total net sales

Mobile end-user service revenue* Data usage growth (Excluding MVNO networks)

+121%

Q4 14 Q4 15

Sweden Netherlands

Kazakhstan CEE

6

Page 7: Q4 2015 presentation

Tele2 SwedenNet sales(SEK million)

EBITDA and EBITDA marginQ4 (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 150

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 150

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

+6%

7

Page 8: Q4 2015 presentation

Tele2 SwedenChurn Tele2 brand 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

Page 9: Q4 2015 presentation

Tele2 BalticsNet sales(SEK million)

EBITDA and EBITDA marginQ4 (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 150

50

100

150

200

250

300

+9% -3%

973 989

33% 32%

0%

10%

20%

30%

40%

50%

60%

FY 14 FY 150

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

Page 10: Q4 2015 presentation

Tele2 NetherlandsNet sales(SEK million)

EBITDA and EBITDA marginQ4 (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 150

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 150

100

200

300

400

500

600

700

800

900

1000

-51%

10

Page 11: Q4 2015 presentation

Tele2 NetherlandsOutdoor population coverage 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

Page 12: Q4 2015 presentation

Strong net sales 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 KazakhstanNet 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 1331 372

3% 3%0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

FY 14 FY 150

200

400

600

800

1000

1200

1400

1600

+21%

433

12

5%0%

-10%

-5%

0%

5%

10%

15%

20%

Q4 14 Q4 150

50

100

150

200

250

300

350

400

450

500

12

Page 13: Q4 2015 presentation

Financial Overview

Page 14: Q4 2015 presentation

Financial highlights

Mobile end-user service revenue(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

Page 15: Q4 2015 presentation

Financial highlights

Mobile end-user service revenue(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%2.215

Page 16: Q4 2015 presentation

Mobile end-user service revenue

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

Page 17: Q4 2015 presentation

EBITDA

Tele2 Group(SEK million)

1,412

Development per 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 150.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

EBITDA margin

1 4121 337

66

-8-138 -22

27

Q4 14 Sweden Baltics Netherlands Kazahkstan RoW Q4 15

-5%

17

Page 18: Q4 2015 presentation

CAPEX

Tele2 Group(SEK million)

Development per market(SEK million)

1 030938

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 150.00%

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 2046

76

43

Q4 14 Sweden Baltics Netherlands Kazahkstan RoW Q4 15

+19%

18

Page 19: Q4 2015 presentation

Free cash flowTotal operations

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 DiscontinuedOperations

One-off items Q4 15

-222%

19

Page 20: Q4 2015 presentation

Debt position and financial leveragePro forma net debt / 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 billionFinancialleverage

20

Page 21: Q4 2015 presentation

Challenger Program Update

Page 22: Q4 2015 presentation

Challenger Program progressing

2015

30%

40%

0%

12%

60%

80%

20%

25%

30%

67%

4%

15%

20182014

Simplify% of products harmonized 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

Page 23: Q4 2015 presentation

Initiatives commenced in 2015

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

Page 24: Q4 2015 presentation

Q4

Challenger Program roadmap

2015 20162014 2017 2018

Investment phase

Benefits phase

24

Page 25: Q4 2015 presentation

Financial Guidance

Page 26: Q4 2015 presentation

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

26

Page 27: Q4 2015 presentation

Summary

Page 28: Q4 2015 presentation

Key priorities moving forward

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

Page 29: Q4 2015 presentation

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

Step-Change Productivity

Winning People & Culture

Vision

Mission

Where we play

Mobile access

Our current footprint

Residential and Business

M2M & IoT

Responsible Challenger

29

Page 30: Q4 2015 presentation

THEEND