2. SALE OF TELE2 RUSSIA
Press and Analyst Presentation
March 27, 2013
Mats Granryd
3. Disclaimer
Forward-looking statements
This presentation contains certain forward-looking statements that reflect the Company’s current views or expectations
with respect to future events and financial and operational performance. The words “intend”, “estimate”, “expect”, “may”,
“plan”, “anticipate” or similar expressions regarding indications or forecasts of future developments or trends, which are
not statements based on historical facts, constitute forward-looking information. Although the Company believes that
these statements are based on reasonable assumptions and expectations, the Company cannot give any assurances
that such statements will materialize. Because these forward-looking statements involve known and unknown risks and
uncertainties, the outcome could differ materially from those set out in the forward-looking statement.
The forward-looking statements included in this presentation apply only to the date of the presentation. The Company
undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, other than as required by law. Any subsequent forward-looking information that
can be ascribed to the Company and the Group or persons acting on the Company’s behalf is subject to the reservations
in or referred to in this section.
3
4. Tele2 has Agreed to Sell Tele2 Russia to VTB
Group
• A cash transaction comprising $2.40 billion (approximately SEK 15.6 billion) in equity
value and $1.15 million (approximately SEK 7.5 billion) in Net Debt
Attractive Value
• AV/EBITDA 2012 4.9x
• Capital gain of SEK 15.6 billion
• Monetisation of Tele2’s 12 years of investing and building a successful business in
Successful the Russian market. Total investments amount to SEK 15.4 billion and total return,
Monetisation & including proceeds from sale, amount to SEK 31.9 billion
Shareholder
Returns • Following the closing of the transaction, Tele2 is proposing to distribute SEK 28 per
share, in total SEK 12.5 billion by means of a share redemption program
Transformed • Attractive and diversified market mix and a strong spectrum portfolio driving growth
Tele2 Poised for
Continued • Strong balance sheet will enable Tele2’s strategic flexibility and possibilities of
Success maintaining an attractive shareholder remuneration policy
Notes
1. All values converted from USD using current SEK/USD FX rate of 6.48
4
5. VTB Group
• Created as a Russian foreign trade company in 1990, VTB Group has grown to become a
listed international Group of companies active mainly in Russia, Europe and the CIS
• The Private Equity arm, VTB Capital, was formed in 2008 and has since made over a dozen
History investments and attracted significant co-investments from leading international investors.
The combined market equity value of the companies that VTB Capital and its co-investors
control is estimated at over five billion USD
• VTB Capital was voted the best PE firm in Russia in 2012*
• The current portfolio of private equity investments is comprised of companies operating
Investment across a variety of industries, including TMT and Media
focus • Such investments include IT services companies EPAM and Luxoft, advertising company
Russ Outdoor, integrated telecoms operator Vivacom and others
• VTB Capital’s holding period is normally 3-5 years after which it sells its investments through
public listings or trade sales
• During the investment holding period, VTB Capital plays an active part in the governance of
Investment
portfolio companies, by helping develop growth strategies, creating consolidation
holding period
opportunities and improving efficiencies
and governance
• VTB Capital has established a strong track record in exciting investments, both to private
investors and via public markets, such as EPAM's New York listing last year, which was the
first IPO of a CIS company on the NYSE in over eight years
5 *by Private Equity International Magazine
6. Background of the Transaction
Value maximisation for Tele2 and its shareholders
Deal certainty, particularly with regards to financing and regulatory considerations
Expeditious process with minimal disruption to the operations of Tele2 Russia
Strong balance sheet for Tele2 Group, SEK 12.5 billion distribution to shareholders, while
maintaining flexibility to pursue growth opportunities beyond current footprint
6
7. Tele2 Russia has Shown Stellar Growth
Since its Entry into the Market
Subscribers
‘000s
Phase 1 Phase 2 Phase 3
Initial Launch Market Penetration Market Expansion
2001- 2004 2005-2006 2007-2012
28 000
• Tele2 enters Russian market via acquisition of 12 regional • launches a GSM network in • Acquisition of Teleset’s mobile network in the region of Kaliningrad
mobile operators Voronezh Region and • Launch of network in the Krasnodar Region and Adygei Republic
• Launch of GSM networks in Russia acquires a cellular operator in
• The company continues to invest in rollout, despite challenging economic conditions
Lipetsk 22 716
• Acquires a cellular operator in Voronezh Region
• Acquires four GSM operators
in Arkhangelsk, Murmansk 20 636
21 000
and Novgorod Regions and in
the Komi Republic 18 438
• Lipetsk Region and Komi
Republic relaunched under
Tele2 brand 14 451
14 000
10 422
8 560
7 000 6 453
3 274
1 344
208 486
174
0
2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A
Revenue (1)
1.2 1.2 1.2 2.1 4.1 10.3 18.1 25.3 29.4 42.7 51.9 59.5
(RUB Bn)
YoY Growth n.a. 4% (2%) 80% 71% 151% 76% 40% 16% 45% 22% 11%
EBITDA (1)
0.3 0.3 (0.2) (0.7) (0.6) 2.1 5.8 8.6 9.7 14.9 20.3 21.7
(RUB Bn)
% Margin 25% 25% (11%) (35%) (15.%) 20% 32% 34% 33% 35% 39% 37%
Source: Company Information
Notes
7 1. For reference current RUB/SEK FX rate of 0.20942
8. Transformed Tele2 Group
2012 Full Year Financials
(SEKm) SE NL NO KZ HR
Rank 2/4 4/4 3/3 3/4 3/3
12,699 5,267 4,749 957 1,321
Sales
(41%) (17%) (15%) (2%) (4%)
3,365 1,549 214 -387 60
EBITDA
(54%) (25%) (3%) (n/a) (1%)
Nr. of FTE's 1,576 1,016 437 663 133
Nr. of Subs
4.6 1.0 1.2 3.4 0.8
(millions)
(SEKm) LAT LIT EST GER AUS
Rank 2/3 1/3 2/3 n/a n/a
1,036 1,206 886 946 1,353
Sales
(4%) (4%) (3%) (3%) (4%)
358 433 236 278 333
EBITDA
(6%) (7%) (4%) (4%) (5%)
Nr. of FTE's 275 103 272 82 355
Nr. of Subs
1.0 1.8 0.5 0.8 0.3
(millions)
8
9. Tele2 Well-Positioned for Future Growth
Leading Infrastructure-Based Challenger Uniquely Positioned to Capitalize on Mobile
1 with an Attractive Market Mix 2 Data and Internet Growth
Strong Opportunities for Enhanced Cost
3 Efficiency 4 Unique Position for Continued Growth
9
10. Leading Infrastructure-Based
Challenger with an Attractive Market Mix
Strong Spectrum Portfolio Best Commercial Offer in the Market
Price Perception – Postpaid Sweden
Percent of respondants
30%
25% Telia
Tele2
Telenor
20%
Tele2
Telia
15%
3
10%
Comviq (Tele2)
5%
Halebop
0%
Q2-08 Q2-09 Q2-10 Q2-11 Q2-12
Attractive Market Mix
Infrastructure-based challenger
Attractive macroeconomic footprint
Best commercial offer in the market
Uniquely positioned to gain market
share from incumbents
10
11. Uniquely Positioned to Capitalise on
Mobile Data and Internet Growth
Demand Growth – European Mobile Data Usage Tele2 Sweden - Mb/week
Pb
10,0
8,0
6,0
4,0
2,0
0,0
2009 2010 2011 2012 2013e 2014e 2015e 2016e Aug 2011 May 2012 Jan 2013
Smartphone 3G Tablets and dongles 3G Smartphone LTE Tablets and dongles LTE 3G 4G
MBB Penetration (“Large Screen Data Only”) Tele2 Kazakhstan – Mb/week
EUR/Sub/month
•
Germany
Netherlands Spain
France Italy
UK Finland
Sweden Austria
0% 5% 10% 15% 20% 25% 30% 35% 2012-1 2012-13 2012-25 2012-37 2012-49 2013-9
11 Source: Internal company information, Arthur D little , BNP Paribas and Analysys Mason
12. Strong Opportunities for Enhanced
Cost Efficiency
Cost Leadership Reduction in Network Cost
AT Kearney cost benchmark Principle of JV Saving CAPEX & OPEX
33.1% -0.9%
30.8%
28.0% 27.1%
25.8% 25.6%
23.2% 23.1% 22.3% 100%
21.7%
40% 90%
Tele2 saving
JV's Capex If Tele2 would
50% build own
& Opex
Tele2 share network
of JV's Capex Capex & Opex
T2 2010 T2 2011 & Opex
Best practice in Swedish network JV
structure
Cost Leadership Significant mobile network capex and opex
Tele2 continues to reduce the cost gap but savings
is still second best Netherlands
Opportunities to co-build due to obligation to
share sites and towers
12
13. Unique Position for Continued Growth
Revenue Tele2 Group ex. Russia
SEK Bn
• Tele2 expects to achieve compounded
40
annual revenue growth for the Group of
between 5 – 7 percent until year 2015,
30
reaching at least SEK 35.6 billion.
20
29,9 29,5 30,7 • Tele2 expects to achieve compounded
10 annual EBITDA growth for the Group of
between 10 – 12 percent until year 2015,
0
2010A 2011A 2012A 2015E reaching at least SEK 8.3 billion.
EBITDA Tele2 Group ex. Russia • All operations in the Group should have at
SEK Bn
least 20 (earlier 24) percent return on
10
capital employed (ROCE).
7,5 • The positive operational development over
the next three years will predominantly be
5 driven by strong mobile development in
5,8
6,7 6,2 Sweden, the Netherlands, Norway and
2,5
Kazakhstan.
0
2010A 2011A 2012A 2015E
13
14. Tele2’s Strengths
Tele2 – a European mobile operator
‒ Mobile is our strategy
We will be the champions of customer value in everything we do
‒ We will excel in our core assets, the customer relationship and mobile access
‒ We will be the operator of choice
‒ We will continue to innovate in products, price and packaging
‒ Through operational excellence, we will lead on cost and price
‒ We do the unexpected, putting our edge to use
‒ We are fast and react quickly with a time to market beating the competition
We always provide our customers what they
need, for less
14
15. Net debt development scenario
SEK billion
1.75x EBITDA 2012
16.3 1.25x EBITDA 2012
-23.0 9.0
12.5
3.2
Pro forma net debt Proceeds from sale Ordinary dividend Extraordinary Net debt excl.
Net debt excl. Tele2
Q4'12 incl. Dutch dividend Tele2 Russia
Russia
LTE license
15
16. Tele2 to Return SEK 15.7 Bn to its
Shareholders
• The Tele2 Group will maintain its balance sheet target of a net debt to EBITDA
Target
ratio of between 1.25 and 1.75 times over the medium term to cater for an
Leverage
efficient capital structure
• To reach its targeted level for an efficient capital structure following the closing
of the transaction, Tele2’s Board of Directors proposes to distribute SEK 28
SEK 12.5 Bn per share, totaling SEK 12.5 billion, by means of a redemption of shares
Share • The redemption of shares will be subject to approval at the Extra General
Redemption Meeting, which will be called by the Board of Directors upon closing of the
Program transaction
• The dividend for 2012 of SEK 7.10 per share, totaling SEK 3.2 billion, will be
paid as previously announced
16
17. Transaction Timetable
• 27 March 2013: Agreement with VTB Group to sell Tele2 Russia
announced
• The transaction is expected to close shortly
• Following closing of the transaction the Board of Directors will call an
EGM to propose the SEK 12.5 billion capital distribution through the
redemption of shares
17
18. Summary
Compelling offer and transaction structure, crystallizing our
success in Russia
The transformed Tele2 Group offers a convincing investment story
Strong balance sheet enabling operational flexibility and attractive
shareholder remuneration policy
18
