Tele2 - Third quarter 2011

THIRD QUARTER 2011

Tele2 AB
19 October 2011

Agenda

• About Q3 2011

• Financial Review

• Concluding remarks

2

Tele2 Group Q3 highlights

Q3 Financials Q3 Operational

• In the third quarter, group net • Tele2’s customer base
sales (curr. adj.) grew by 6 amounted to 33.5 million
percent customers

• All time high EBITDA (curr. • Russian subscriber base
adj.) amounted to SEK 2 893 reached 20.4 million
mn, corresponding to an customers and subscriber
increase of 8 percent base in Kazakhstan surpassed
1 million customers
• EBITDA margin (curr. adj.)
amounted to 28 percent • Tele2 acquired Network
Norway

3

Market Area Russia: Overview
Population
Appr. 140 million
Tele2 Russia
43 regions of Russian Federation
20.4 million subscribers
Mobile operator #4 in Russia in terms
of subscribers and revenue
Represents 30% of total net sales Q3 2011

Focus
Continue strong growth in customer intake, maximizing the 2G opportunity
Ensure that newcomer and challenger regions reach the same operational trends as
defender regions
Evaluate possibilities to expand carefully its operations through new licenses as well
as by complementary acquisitions

4

Q3 Highlights Tele2 Russia
Region’s position Market share EBITDA
Moscow
Defender (10 regions) Leader in the region ≥ 35%
(avg. 46%) (avg. 47%)
Challenger (17 regions) ≥ 20% < 35%
(avg. 31%) (avg. 31%)
Newcomer (16 regions) < 20% ≥0
(avg. 17%)

EBITDA and NET SALES and CUSTOMER BASE and
EBITDA MARGIN YoY NET SALES GROWTH CUSTOMER INTAKE
SEK Million SEK Million Thousands of customers
1400 50% 3 200 50% 22 000 1 400

40%
1200 45% 3 000 20 000 1 150
30%
1000 40% 2 800 18 000 900
20%
2 600 16 000 650
800 35% 10%

2 400 0% 14 000 400
600 30% Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
EBITDA (left) Net sales (left) Customer base (left)
5 EBITDA margin (right) YoY net sales Customer net
growth (right) intake (right)

Understanding Russia’s mobile market
MOBILE SUBSCRIBERS AND PENETRATION SUBSCRIBER MARKET SHARE
Million Percent Percentage of total number of subscribers
250 180% 35%
30%
200 160%
25%

150 140% 20%
15%
100 120% 10%
5%
50 100%
06 07 08 09 10 11F 12F 13F 14F 15F 0%
Q2 10 Q3 10 Q4 10 Q1 11 Q2 11
Subscribers Penetration

NET ADDITIONS ARPU DEVELOPMENT TELE2 RUSSIA
100% RUR/month
230
80%

60% 223

40%
215
20%
208
0%

-20% 200
Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311
-40%

6 Tele2 MegaFon Vimpelcom MTS

Tele2 Russia: Regulatory update

With regards to regulation of use of frequencies in Russia, the
following should be highlighted:

• The Regulator in principle admits that Technology Neutrality can be
applied to 900/1800 MHz spectrum. However, to avoid GSM service
quality deterioration if the LTE is launched alongside GSM frequencies,
this topic has to be examined further. The study shall be finished by
March 2012.

• The Regulator has also announced that it is possible for seven
operators to run LTE services in Russia starting from 2015 onwards,
and that the new LTE license tenders will be run by the end of Q1
2012.

7

Market Area Nordic: Overview

Population
14.4 million

Tele2 Sweden and Tele2 Norway
Home market and test bed for new services
Sweden 31%; Norway 7%

Focus
Sweden: Building on mobile growth and 4G roll-out coupled with household/
corporate fiber strategy
Norway: Integration of recently acquired Network Norway

8

Q3 Highlights Tele2 Sweden

• Net sales grew by 3% amounting to SEK 3,222 mln and
EBITDA amounted to SEK 861 mln
• Rationalisation within the Swedish organisation with savings
target of SEK 100 mn in personnel cost annually
SEK 45 mln one-off cost

1000 40% 3500 20% 4800 120

800 30% 3000 15% 4750 80

600 20% 2500 10% 4700 40

400 10% 2000 5% 4650 0

200 0% 1500 0% 4600 -40
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Mobile Fixed broadband Fixed telephony Other Customer base (left)
9
EBITDA margin (right) YoY net sales Customer net
growth (right) intake (right)

Mobile operational performance

MOBILE REVENUE DISTRIBUTION MOBILE REVENUE
TELE2 SWEDEN and MOBILE EBITDA MARGIN TELE2 SWEDEN
SEK Million
2500 36%
16%

2400 34%
Mobile voice
Mobile data 2300 32%

2200 30%

84%
2100 28%
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Revenue (left) EBITDA margin (right)

We believe mobile revenue will continue to grow driven by
a strong customer demand for data

10

Smartphone market development
SMARTPHONE MARKET SHARE*
100%

75%
Sales of top ten mobile phones
50% Tele2 Sweden (Sept 2011)
25%
1. iPhone 4 16 Black
0%
1103 1104 1105 1106 1107 1108 1109 2. Samsung Galaxy S2
Regular phone Smartphone 3. Huawei Sonic
4. SE Cedar
SMARTPHONE PRICE RANGE 5. Samsung Galaxy Gio
100% 6. ZTE Blade
75% 7. Samsung Galaxy Ace
50%
8. SE Xperia Ray
9. iPhone 4 32GB
25%
10. HTC Sensation
0%
Last year Today
High end Mid range Low end
*Postpaid residential, quantity of handsets
11

Benefits of mobile networks in JVs

MOBILE EBIT SAVING NET4MOBILITY
SEK Million
• Significant benefits can be 350

obtained from network sharing 280

• Net4Mobility rolling out state of 210

the art 4G network with
140
improved 2G capabilities
through EDGE 70

0
2012 2013 2014

We are building Sweden’s best 2G/4G network expecting
to cover 99% of population by end 2012

12

Q3 Highlights Tele2 Norway

• The Tele2 Norway / Network Norway / Mobile Norway
integration continues at full speed
• New management team appointed on the 5th of October
• Revenue is SEK 705 mln and EBITDA is SEK -19 mln, the latter
a consequence of reduced MTR

50% 50%

13

Market shares on Norweigan market
2.8 % MOBILE REVENUE MARKET SHARES
3.9 %

7.8 %
Telenor
6.3 % NetCom (Telia Sonera)

Chess (Telia Sonera)
5.5 %
Network Norway (with
53.4 % OneCall and Lebara)
Tele2

20.2 % Ventelo

Others
Det norske markedet for elektroniske
kommunikasjonstjenster 2010”,
Post- og teletilsynet, 20 May 2011.

Long term market share of 25% and alignment with Tele2 Group targets

14

Market Area Western Europe: Overview

Population
106 million

Leading the group in business to business services
and consumer fixed broadband
Netherlands 14%; Germany 3%; Austria 3%

Focus
Netherlands Grow in mobile and SME
Austria Continue growth in B2B
Germany Grow FVM product

15

Q3 Highlights Tele2 Netherlands

• Tele2 Netherlands reached EBITDA of 35%
on broadband
• Re-organisation in Q2 becomes visible
in bottom line result
• On-going evaluation of possibilities for Tele2
Netherlands to become MNO

500 35% 1600 20% 1200 0

375 33% 1200 10% 1100 -10

250 31% 800 0% 1000 -20

125 29% 400 -10% 900 -30

0 27% 0 -20% 800 -40

Mobile Fixed broadband Fixed telephony Other Customer base (left)
16
EBITDA margin (right) YoY net sales growth (right) Customer net intake (right)

Evaluating a move from MVNO to MNO

RATIONALE AUCTION CONDITIONS

Customers increasingly Auction planned for Q2 2012
demand mobility
2x10 MHz reserved in the valuable
Strong Group 800 MHz band for new entrants
experience in mobile
data networks Auction start price per 2x5MHz 800
license is EUR 35 mln
The opportunity in NL
is unique and now. The Roll out obligation for low
upcoming auction will frequencies will be stricter than for
set the scene till 2030 high frequencies

17

Q3 Highlights Tele2 Germany
and Tele2 Austria
• Both markets are strong cash flow contributors to the Group

• Tele2 Germany: Fixed via Mobile product has taken off;
14,000 customers migrated from existing customers base

• Tele2 Austria: Strong sales performance and improved
profitability within B2B

TELE2 GERMANY TELE2 AUSTRIA
EBITDA MARGIN EBITDA MARGIN
35% 35%

30% 30%

25% 25%

20% 20%

15% 15%
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11

18

Market Area Central Europe and
Eurasia: Overview

Population
28 million
Estonia 2%; Latvia 3%; Lithuania 3%;
Croatia 4%; Kazakhstan 1%

Focus
Stability and improvements in Baltics
Growth in revenue, profits and market share in Croatia
Establish Tele2 in all regions and continue to grow rapidly in Kazakhstan

19

Q3 Highlights Tele2 Lithuania

• Tele2 Lithuania had a positive net intake of
22,000 customers
• EBITDA margin amounted to 37% (37%)

EBITDA and NET SALES and EBITDA-CAPEX
EBITDA MARGIN YoY NET SALES GROWTH
SEK Million SEK Million SEK Million
140 45% 350 0% 150

120 40% 325 -8% 100

100 35% 300 -15% 50

80 30% 275 -23% 0

60 25% 250 -30% -50
EBITDA (left) Net sales(left) EBITDA CAPEX
20 EBITDA margin Net sales YoY EBITDA-CAPEX
(right) growth (right)

Q3 Highlights Tele2 Latvia

• Tele2 Latvia had a positive net intake of
13,000 customers
• Tele2 reached an EBITDA margin of 34%
(32%)

120 40% 330 0% 120

100 35% 310 -8% 80

80 30% 290 -15% 40

60 25% 270 -23% 0

40 20% 250 -30% -40

Q3 Highlights Tele2 Estonia

• Substantial efforts to increase
efficiency show results
• Tele2 Estonia reached an EBITDA
margin of 31% (24%)

80 35% 235 0% 90

70 30% 225 -5% 60

60 25% 215 -10% 30

50 20% 205 -15% 0

40 15% 195 -20% -30

Q3 Highlights Tele2 Croatia

• Positive free cash flow of SEK 86 mln
• Solid net intake of 45,000 customers
• EBITDA margin amounted to 11% (4%)

EBITDA MARGIN YoY NET SALES GROWTH*
60 12% 450 14% 80

45 9% 400 7% 40

30 6% 350 0% 0

15 3% 300 -7% -40

0 0% 250 -14% -80
EBITDA (left) Net sales(left) * YoY net sales EBITDA CAPEX
23 EBITDA margin Net sales YoY growth positive in EBITDA-CAPEX
(right) growth (right) local currency

Tele2 Croatia forward looking
statement

The following assumptions should be taken into account when
estimating the Croatian mobile operations in 2011:

• Tele2 expects Croatia to reach an EBITDA margin of 20 percent by
Q3 2013 (earlier free cash flow break-even by 2H 2011)

24

Q3 Highlights Tele2 Kazakhstan

• Commercial launch of Tele2 brand
completed in 8 regions
• Solid net intake of 459,000 customers
• Total number of customers surpassed
1.1 million

NET SALES CUSTOMER BASE and ARPU and
CUSTOMER INTAKE MINUTES OF USE
SEK Million Thousands of customers SEK Min
120 1200 60050 90

90 900 40040 80

60 600 20030 70

30 300 0 20 60

0 0 10
-200 50
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 01 11 02 11 03 11 04 11 05 11 06 11 07 11 08 11 09 11

Net sales Customer base (left) ARPU (left)
25 Customer intake Minutes of use
(right) (right)

All regions launched by year-end
Pavlodar
launched on
Petropavl 1st of
October
Kokshetau Pavlodar
Kostanay
Astana

Oral
Aktobe Semey
Karagandy Oskemen

Atyrau

Almaty
Kyzyl-Orda
Aktau
Taraz

Shymkent

26

Tele2 Kazakhstan forward looking
statement

The following assumptions should be taken into account when
estimating the operational performance of the total operations in
Kazakhstan:

• Tele2 expects the subscriber base to reach 2.3-2.5 million by year-end
2012
• Tele2 expects an EBITDA contribution in 2011 of appr.
SEK -400 (earlier -500) million
• Tele2 expects capex to be appr. SEK 1,000 million (earlier in the range
of SEK 1,200-1,400 million) by year-end 2011
• Tele2 expects to reach EBITDA break-even by 2H 2013
• Tele2 expects to reach a long-term mobile customer market share of
30 percent

27

Agenda

• About Q3 2011



28 2010-10-20

Q3 2011 Group results
SEK million Q3 11 Q3 10 Change %
Net Sales 10 340 9 989 +3.5%
EBITDA 2 893 2 751 +5.2%
- EBITDA margin (%) 27.9% 27.5%
Depreciation and Joint Ventures -923 -885
- Depreciation of Net sales (%) 9% 9%
One-off items -20 17

EBIT 1 950 1 892 +3.1%
Normalized EBIT 1 970 1 875
- Normalized EBIT margin (%) 19% 19%
Financial items -263 -16 One-off item of
SEK 1,049 mln
Taxes -428 608
affecting Q310
Net profit/loss 1 259 2 484
Net result, discontinued operations 1 29

Net result total operations 1 260 2 513

29 2010-10-20

Currency movements (vs. SEK)

YoY difference in YTD Ave FX rates,
2011 vs. 2010
EUR -6.6%

RUB -8.3%

End of Q3 spot rate
vs. 31/12-2010
EUR +3.0%

RUB -4.3%

EUR/EUR pegged and RUB currencies
approximately 2/3 of sales and EBITDA

30 2010-10-20

Currency-adjusted sales and EBITDA
(excl. one-off)

CURRENCY-ADJUSTED SALES, TOTAL +6% CURRENCY-ADJUSTED EBITDA, TOTAL +8 %
SEK Million SEK Million
12 000 3 500

10 000 3 000 +10%

-1% 2 500
8 000
+9% -1%
2 000
6 000
+20% +29%
1 500
4 000
1 000

2 000 +1% -6%
500

0 0
Q3 10 Q3 11 Q3 10 Q3 11

MA Western Europe MA Central Europe and Eurasia MA Russia MA Nordic

31 2010-10-20

Taxes

Taxes in income
YTD Q3 11 Q3 10
statement
Normal -1 196 -428 -441
One-Off - - 1 049
Total -1 196 -428 608

Taxes in cash flow Q3 11 Q3 10
Normal -785 -235 -152

Deferred tax assets amounted to SEK 3.2 (3.3) billion

32 2010-10-20

Cash flow for Q3 2011

SEK million Q3 11 Q3 10
OPERATING ACTIVITIES
Cash flow from operations, before paid tax 2833 2733
Cash flow from operations, paid taxes -235 -152
Changes in working capital 77 39
Cash flow from operating activities 2675 2 620

INVESTING ACTIVITIES
CAPEX -1 073 -923
Cash flow after CAPEX 1 602 1 697

33 2010-10-20

Group financial profile
PROFORMA NET DEBT INCL. JV / EBITDA 12’M ROLLING
Ratio
SEK Billion
20.0 2.00
Upper limit
17.5 1.75
15.0 1.50
Lower limit
12.5 1.25
10.0 1.00
7.5 0.75
5.0 0.50
2.5 0.25
0.0 0.00
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Pro Forma Net Debt #REF!
Pro Forma Net Debt / EBITDA 12'M ROLLING
Ordinary dividend
Extraordinary dividend

34 2010-10-20

Debt profile September 2011

RCF (SEK) 7.8 bn
RCF (EUR) 1.3 bn
Kazakhstan debt 2.0 bn
Rubel bond 2.7 bn
Off balance sheet 0.3 bn
Gross debt position SEK 14.1 bn

Net debt amounts to 11.2 bn

35 2010-10-20

Bal. sheet consideration / Fin. leverage
When available, invest in value accretive M&A or
C
M&A / New growth new business opportunities meeting Tele2’s
A opportunities strict financial hurdles
S
H

G
E
Shareholder Enhance shareholder value by distributing
N recurring cash to shareholders
E remuneration
R
A
T
I
O Retain financial buffer
N Cash / Buffer

Prudent assessment based on (a) status of operations, (b) future strategic opportunities,
(c) competitive landscape and (d) general macroeconomic status

36 2010-10-20

Net debt and dividend targets

Shareholder remuneration
“Tele2 will seek to pay a progressive ordinary dividend of no less than 50 percent
of net income excluding one-off items. Extraordinary dividends and the authority to
purchase Tele2’s own shares will be recommended or sought when the anticipated
total return to shareholders is deemed to be greater than the achievable returns
from the deployment of the capital within the group's operating segments or the
acquisition of assets within Tele2’s economic requirements.”

Balance sheet
“Tele2 has a target net debt to EBITDA ratio of between 1.25 and 1.75 times over
the medium term. The company’s longer term financial leverage should be in line
with the industry and the markets in which it operates and reflect the status of its
operations, future strategic opportunities and contingent liabilities.”

37 2010-10-20

Mobile Fixed broadband Fixed telephony Other

Group financials
GROUP EBITDA and GROUP NET SALES
GROUP EBITDA MARGIN
SEK Million SEK Million
3500 30% 12000

3000 28% 10000

2500 26% 8000

2000 24% 6000

1500 22% 4000
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Group EBITDA
margin
GROUP CAPEX ROCE
SEK Million Percent
1600 26%

1200 24%

800 22%

400 20%

0
18%
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11

38 2010-10-20

Group mobile EBITDA

GROUP MOBILE EBITDA
SEK Million Percent
3 000 35.0%

2 250 32.5%

1 500 30.0%

750 27.5%

0 25.0%
Q3 10 Q4 10 Q1 11 Q2 11 Q3 11

Mobile EBITDA on own infrastructure Mobile EBITDA (MVNO)
Mobile EBITDA margin on own infrastructure Total mobile EBITDA margin

39 2010-10-20

Sweden mobile revenue explained
SWEDEN MOBILE REVENUE WATERFALL
SEK Million

103 (+4.7%) 2368
-32 79 (+3.6%)
2218 2186

Revenue Q3 2010 Non recurring Adjusted external Underlying mobile Mobile equipment Revenue Q3 2011
revenue

40 2010-10-20

Sweden mobile EBITDA explained

SWEDEN MOBILE EBITDA WATERFALL N4M -13
SEK Million
Challenge
Sweden -34

26 (+3.5%) -5 (-0.7%) -47 (-6.2%)
748
722

EBITDA Q3 2010 GM2 (incl SUNAB) Other N4M EBITDA Q3 2011

41 2010-10-20

Agenda

• About Q3 2011



42 2010-10-20

Concluding remarks

• We experience yet another record quarter in the third quarter of 2011.

• We and our industry have shown good resilience towards current
financial turmoil.

• We constantly chase unnecessary costs in order to stay on our toes.

• We are part of a growth industry, where data is forecasted to grow.

• We offer the best of both worlds.

43 2010-10-20

Tele2 - Third quarter 2011

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