Tele2 First quarter 2012

FIRST QUARTER 2012

Tele2 AB
19 April 2012

Agenda

• About Q1 2012

• Financial review

• Concluding remarks

2

Tele2 Group Q1 Highlights

Q1 Financials Q1 Operational
• Net sales (curr. adj.) for the • Tele2’s customer base
Group grew by 8 % and amounted to 34.8 million
amounted to SEK 10,481 customers
million
• Tele2 Kazakhstan continued its
• EBITDA amounted to SEK successful launch of new
2,571 (2,544) million, regions, resulting in a net
equivalent to an EBITDA intake of 332,000 customers
margin of 25 (26) %
• Tele2 Russia brought in
304,000 customers

• Continued diversification of
credit portfolio

3

Market Area Russia: Overview

Population
Appr. 140 million
Tele2 Russia
 43 regions of Russian Federation
 20.9 million subscribers
 Mobile operator #4 in Russia in terms
of subscribers and revenue
Represents 29% of total net sales Q1 2012

Focus
 Continue to grow customer base and maximize the 2G opportunity
 Evaluate possibilities to expand carefully through new licenses as well as by
complementary acquisitions
 Make progress on technology neutrality

4

Q1 Highlights Russia

• Increased marketing spend in the quarter
• New agreements with federal distribution
channels
• Leading to improved customer intake in
combination with higher ARPU

CUSTOMER BASE and NET SALES and EBITDA and
CUSTOMER INTAKE YoY NET SALES GROWTH EBITDA MARGIN

Thousands of customers SEK Million SEK Million
22 000 800 4 000 20% 1 600 42%

40%
21 000 600 3 000 15% 1 200
38%
20 000 400 2 000 10% 800
36%
19 000 200 1 000 5% 400
34%

18 000 0 0 0% 0 32%
Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12

Customer base (left) Net sales (left) EBITDA (left)
5 Customer net YoY net sales EBITDA
intake (right) growth (right) margin (right)

The Russian mobile market
TELE2 SUBSCRIBERS AS PART OF TOTAL RUSSIAN MOBILE SUBSCRIBERS AND PENETRATION
MOBILE MARKET
Tele2
Million subscribers Million subscribers Subs Penetration (%)
9.1%
5.6%

NET ADDITIONS TELE2 RUSSIA EBITDA MARGIN
Tele2 MegaFon
Vimpelcom MTS 2010 2011 2012
Thousands of subscribers
8 000 44%

6 000
40%
4 000
36%
2 000
32%
0

-2 000 28%
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
09 09 09 10 10 10 10 11 11 11 11 12

6

Revenue source development

TELE2 RUSSIA: ARPU DEVELOPMENT
REVENUE SPLIT Q1 2012 RUB

8.8% 400

300
218
200

211
91.2% 100

0
2006 2007 2008 2009 2010 Q1 Q2 Q3 Q4 Q1
11 11 11 11 12
Data access Voice revenue (%) Tele2 MegaFon Vimpelcom MTS
revenue (%)

The share of data revenue grows and is comparable to
the market level. ARPU is growing.

7

Regulatory update: Tele2 Russia

Technology neutrality LTE license tender update
update

• Technology neutrality discussion • Tele2 perceives that it likely that
supported by a number of operators several LTE 800/2600 licenses will
be tendered before the end of 2012
• Tele2 has completed LTE1800 trials and the tender terms will be
in cooperation with NIIR* in late established by the new government
March

• Tele2 expects the decision on
technology neutrality before the
end of 2012

* NIIR = (Radio Research and Development Institute)
8

Tele2 Russia forward looking statement

The following assumptions should
be taken into account when
estimating the operational
performance of the total operations
in Russia in 2012:

• Tele2 expects the subscriber base to
reach 21.5-22 mln.

• Tele2 expects a percentage growth of
ARPU in low single digits (earlier to
remain stable) in local currency.

• Tele2 expects an EBITDA margin of
between 37-39 (earlier 39-40) percent.

• Tele2 expects capex of between SEK
1,300 - 1,500 mln.

9

Market Area Nordic: Overview

Population
14.4 million

Tele2 Sweden and Tele2 Norway
Home market and test bed for new services
Sweden 29%; Norway 11%

Focus
 Sweden: Build on mobile growth and 4G roll-out coupled with household / corporate
fiber strategy
 Norway: Roll out own network and focus on bucket-price subscriptions

10

Q1 Highlights Tele2 Sweden

• Net sales (external) amounted to SEK 3,071 mln
and EBITDA amounted to SEK 774 mln
• Net intake in Q1 boosted by temporary campaign
on postpaid subscriptions

4 900 80 4 000 12% 1 000 30%

4 800 40 3 000 6% 750 25%

4 700 0 2 000 0% 500 20%

4 600 -40 1 000 -6% 250 15%

4 500 -80 0 -12% 0 10%

Customer base (left) Mobile Fixed broadband Fixed telephony Other

Temporary campaign to defend price
position

148,000 subscriptions sold between 8 March - 11 April of which
65,000 in Q1 2012

12

Mobile postpaid intake and extensions

GROSS INTAKE AND EXTENSIONS Q1 2012
Subscribers
50 000

45 000 Large share of
40 000 extensions on
35 000 current customer
30 000 stock, majority
25 000 opting for 24 month
20 000 subscriptions. March
15 000 intake boosted by
10 000 temporary campaign
5 000

0
Jan Feb Mar
Intake Extensions

13

Smartphone market development

SMARTPHONE INSTALLED BASE*
100%
Sales of top ten mobile phones
Tele2 Sweden (Q1 2012)
80%

1. iPhone 4S 16GB 60%
2. Samsung Galaxy S2
3. iPhone 4 8GB 40%
4. Samsung Galaxy S2 LTE
5. Nokia Lumia 800 20%

6. Samsung E1080
0%
7. HTC Wildfire 1106 1107 1108 1109 1110 1111 1112 1201 1202 1203
8. Samsung Galaxy Nexus Regular handset Smartphone
9. iPhone 4S 32GB
10. Sony Xperia S

* Postpaid residential, quantity of handsets
14

Growth in sales of data packages

DATA PACKAGE CUSTOMER STOCK Q1 2012 MOBILE SURF PACKAGES
Subscribers
700 000

600 000

500 000

400 000
Base Small
300 000

200 000

100 000

0
Apr Maj Jun Jul Aug Sep Okt Nov Dec Jan Feb Mar
2011 2012 Medium Large

Number of customers with data packages either in subscription or
as added packages continues to increase

15

Prepaid to postpaid migration
PREPAID MARKET SHARES 2006-2011* SHARE OF PRE- AND POSTPAID
SUBSCRIPTIONS*
50% 100%
40% 75%
30%
50%
20%
10% 25%

0% 0%
2006 2007 2008 2009 2010 1H 2011 2005 2006 2007 2008 2009 2010 1H
2011
Comviq Telia Telenor Prepaid Postpaid
Lycamobile Tre Övriga

NET INTAKE SEASONAL EFFECTS

Seasonal peaks in intake are
followed by increased churn three
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
months later

*Source: The Swedish Post and Telecom Authority (PTS)
16

Sweden: Mobile operational performance

MOBILE REVENUE SPLIT MOBILE REVENUE
and MOBILE EBITDA MARGIN
SEK Million
2 500 40%
21%
2 000
30%
1 500
20%
1 000
79% 10%
500

0 0%
Q1 11 Q2 11 Q3 11 Q4 11 Q1 12

Data access Voice revenue (%) Revenue (left) Mobile EBITDA margin (right)
revenue (%)

Mobile revenue will continue to grow driven by
a strong customer demand for data

17

Tele2 Sweden forward looking statement

performance of the Swedish mobile
operations in 2012:

• Tele2 expects mobile service revenue to
grow by approximately 3-5 (earlier 2-4)
percent.

between 30-32 (earlier 33-35) percent
assuming a stable market
environment.

18

Q1 Highlights Tele2 Norway

• Integration of Tele2 Norway completed
• Satisfactory intake of 16,000 mobile customers
• Tele2 Norway reported total external revenue of
SEK 1,135 mln, of which SEK 1,060 mln was mobile revenue
• Mobile EBITDA contribution was SEK 15 (21) mln

1 600 20 1 600 75% 80 8%

1 200 10 1 200 50% 40 4%

800 0 800 25% 0 0%

400 -10 400 0% -40 -4%

0 -20 0 -25% -80 -8%


Tele2 Norway forward looking statement

performance of the total operations
in Norway in 2012:

• Tele2 expects a total revenue of
between SEK 5,000-5,200 mln.

between 2-3 percent.

• Tele2 expects capex of between SEK
850-950 mln.

20

Market Area Western Europe:
Overview

Population
106 million

Leading the group in business to business services
and consumer fixed broadband
Netherlands 13%; Germany 2.5%; Austria 3.5%

Focus
 Netherlands Grow in mobile and B2B
 Austria B2B & Integration of Silver Server
 Germany Grow Fixed Via Mobile product

21

Q1 Highlights Tele2 Netherlands

• Mobile growth realized mainly in high value postpaid
segment
• Stable financial performance in a turbulent market
• On-going evaluation of possibilities for Tele2
Netherlands to become an MNO
• Significant intake of 13,000 mobile customers
• Secured government contract

1 200 0 1 600 10% 600 40%

900 -10 1 200 5% 450 30%

600 -20 800 0% 300 20%

300 -30 400 -5% 150 10%

0 -40 0 -10% 0 0%


Q1 Highlights Tele2 Germany
and Tele2 Austria
• Both Austria and Germany show stable profitabilty
• Tele2 Germany: Fixed via Mobile product still
going strong with further growing customer base
• Tele2 Austria: Integration of Silver Server
proceeding according to plan. This will further
strengthen Tele2’s position in the B2B market

TELE2 GERMANY TELE2 AUSTRIA
EBITDA MARGIN EBITDA MARGIN
40% 40%

30% 30%

20% 20%

10% 10%

0% 0%
Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12

23

Market Area Central Europe
and Eurasia: Overview

Population
28 million
Estonia 1.9%; Latvia 2.3%; Lithuania 2.8%;
Croatia 2.5%; Kazakhstan 1.5%

Focus
 Efficiency improvements in Baltics
 Need to grow in revenue, profits and market share in Croatia
 Launch two remaining regions and continue to grow rapidly in Kazakhstan

24

Q1 Highlights Tele2 Estonia

• Acquisition of company Televõrgu AS is
completed on 17 February 2012
• Tele2 Estonia maintained a positive
customer net intake

600 30 300 15% 80 36%

450 20 225 8% 60 32%

300 10 150 0% 40 28%

150 0 75 -8% 20 24%

0 -10 0 -15% 0 20%


Q1 Highlights Tele2 Latvia

• Rights obtained for 2 x 20 MHz in the 2.6
GHz frequency band
• EBITDA margin amounted to 37%

1 200 40 400 -5% 120 40%

900 20 300 -10% 90 38%

600 0 200 -15% 60 36%

300 -20 100 -20% 30 34%

0 -40 0 -25% 0 32%


Q1 Highlights Tele2 Lithuania

• Mobile license of obtained 2 x 20 MHz in the 2.6 GHz
frequency band
• EBITDA margin amounted to 41% partly driven by
seasonality

2 000 30 400 5% 160 50%

1 500 15 300 0% 120 40%

1 000 0 200 -5% 80 30%

500 -15 100 -10% 40 20%

0 -30 0 -15% 0 10%


Q1 Highlights Tele2 Croatia

• Q1 result below expectation
• 6% revenue tax was re-stated from February 2012
• Positive customer net intake in all segments

NET SALES and EBITDA and EBITDA-CAPEX
YoY NET SALES GROWTH EBITDA MARGIN
SEK Million SEK Million SEK Million
500 0% 60 12% 50

375 -2% 45 9% 25

250 -4% 30 6% 0

125 -6% 15 3% -25

0 -8% 0 0% -50

Net sales(left) EBITDA (left) EBITDA CAPEX
28 Net sales YoY EBITDA margin EBITDA-CAPEX
growth (right) (right)

Tele2 Croatia forward looking
statement

The following assumption should
performance of the Croatian mobile
operations in 2012:

• Tele2 expects Croatia to reach an
EBITDA margin of 20 percent by Q3
2013.

29

Q1 Highlights Tele2 Kazakhstan

• Commercial launch of the Tele2 brand completed in
14 out of 16 regions
• More than 1 900 BTS on air
• Solid net intake of 332,000 customers
• Total number of customers amounted to 1.7 million

CUSTOMER BASE and ARPU (SEK) and NET SALES
CUSTOMER INTAKE MINUTES OF USE
Thousands of customers SEK MoU SEK Million
2 000 600 60 100 200

1 500 400 45 75 150

1 000 200 30 50 100

500 0 15 25 50

0 -200 0 0 0
Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12
11 11 11 11 11 11 11 11 11 11 11 11 12 12 12
Customer base (left) ARPU (left) Net sales
30 Customer intake Minutes of use
(right) (right)

Launch status Tele2 Kazakhstan

Petropavl

Pavlodar
Kostanay
Kokshetau
Astana
Oral
Aktobe Semey
Karagandy
Oskemen

Atyrau

Almaty
Taldykorgan
Kyzyl-Orda
Taraz
Aktau

Shymkent

Two regions with the main cities of Shymkent and Taraz were launched in March.
The commercial launch of the remaining two regions is expected in April.

31

Tele2 Kazakhstan forward-looking statement

The following assumptions should be
taken into account when estimating the
operational performance of the total
operations in Kazakhstan in 2012:

• Tele2 expects the subscriber base to reach
2.5-2.7 (earlier 2.3-2.5) mln.

• Tele2 expects an EBITDA contribution of
between SEK -350 to -400 (earlier -325 to
-375) mln.

• Tele2 expects capex of between
SEK 550-600 mln.

• Tele2 expects to reach EBITDA break-even
by 2H 2013.

• Tele2 expects to reach a long-term mobile
customer market share of 30 percent.

32

Agenda

• About Q1 2012



33

Group results
SEK million Q1 2012 Q1 2011 % FY 2011

Net sales 10 481 9 642 8.7% 41 001

EBITDA 2 571 2 544 1.1% 11 212

EBITDA margin (%) 24.5% 26.4% -1.9% 27.3%

Depreciaion & associated companies -1 189 -970 22.6% -4 158

Depreciation of net sales (%) -11.3% -10.1% -1.3% -10.1%

One-off items 1 99 -4

EBIT 1 383 1 673 -17.3% 7 050

Normalized EBIT 1 382 1 574 -12.2% 7 054

Normalized EBIT margin (%) 13.2% 16.3% -3.1% 17.2%

Financial items -178 -74 140.5% -674

Taxes -336 -373 -9.9% -1 472

Net profit 869 1 226 -29.1% 4 904

Discontinued operations - -13 -100.0% -7

Net profit 869 1 213 -28.4% 4 897

34

Currency movements Q1 2012

6%

5%

4%

3%

2%

1%

0%

-1%

-2%
EUR RUB NOK

Average Q1 2012 vs. Q1 2011 Fixing rate Mar 2012 vs. Dec 2011

EUR/EUR pegged and RUB currencies represent 58%
of external sales and 72% of EBITDA

35

Depreciation

DEPRECIATION and
DEPRECIATION % OF NET SALES
Change Y-on-Y for Q1
SEK Million
• Acquisition of Network Norway
1 500 11.5%
(SEK 86 mln) of which surplus
11.0% depreciation and amortisation of
1 200
SEK 63 mln
10.5%
900
• Upgrade/replacement of
10.0%
networks in the Baltics during
600 2012 - 2013 (SEK 69 mln)
9.5%

300
9.0% • Sweden SEK 43 mln

0 8.5% • Kazakhstan SEK 19 mln
Q1 11 Q2 11 Q3 11 Q4 11 Q1 12
Depreciation Depreciation of net sales (%)

36

Financial items

Financial items (MSEK) Q1 2012 Q1 2011 FY 2011

Interst income/costs -178 -41 -483

Exchange rate differences, external -13 -9 -24

Exchange rate differences, intragroup 53 17 13

Other financial items -40 -41 -180

Total -178 -74 -674

37

Taxes

Taxes in income statement (MSEK) Q1 2012 Q1 2011 FY 2011

Normal -336 -373 -1 580

One off - - 108

Total -336 -373 -1 472

Taxes in cash flow statement (MSEK) Q1 2012 Q1 2011 FY 2011

Normal -202 -225 -948

One off - - -

Total -202 -225 -948

Deferred tax assets at year to date
amounted to SEK 2.7 (Dec 2011: 3) billion

38

Cash flow
Cash flow (MSEK) Q1 2012 Q1 2011 FY 2011

OPERATING ACTIVITIES

Before paid tax 2 517 2 664 10 895

Paid taxes -202 -225 -948

Change in working capital -419 -257 -257

CF from operating activities 1 896 2 182 9 690

INVESTING ACTIVITIES

CAPEX -830 -1 016 -5 572

% of net sales 7.9% 10.5% 13.6%

CF after CAPEX 1 066 1 166 4 118

Shares and participations -198 3 -1 563

Total 868 1 169 2 555

39

Proforma financial debt profile
SOURCES OF FUNDING
SEK Billion

15.0
12.8
12.1
12.5

10.0

7.5

5.0

2.5

0.0

-2.5 Q4 11 Q1 12

Revolving credit facility Russia bond Other financing Commercial paper
Norwegian bond Off BS items Cash Proforma net debt

40

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

41

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.”

42

Debt position and ratio
PROFORMA FINANCIAL NET DEBT / EBITDA 12'M ROLLING
SEK Billion / Ratio

20.0 2.00

17.5 2.9 1.75 Upper limit
2.9
15.0 1.50

12.5 1.25 Lower limit

10.0 1.00

7.5 0.75
12.8 12.1
5.0 0.50

2.5 0.25

0.0 0.00
Q4 11 Q1 12
Proforma Net Debt Ordinary dividend (to be paid May 2012)
Extraordinary dividend (to be paid May 2012) Leverage Net
Leverage Gross

43

Mobile Fixed broadband Fixed telephony Other

Group financials
GROUP EBITDA and GROUP NET SALES
GROUP EBITDA MARGIN Group EBITDA
SEK Million margin SEK Million
4 000 30% 12 000

28% 9 000
3 000
26%
2 000 6 000
24%
1 000 3 000
22%

0 20% 0
Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12

GROUP CAPEX (BS) ROCE (NORMALISED)
SEK Million Percent
2 000 25%
22%
20% 21%
1 500 19%
19%
15% 15%
1 000
10%

500 5%

0 0%
Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q1 Q2 Q3 Q4 Q1

44

Mobile EBITDA: Sweden and Russia

SWEDEN EBITDA and EBITDA RUSSIA EBITDA and EBITDA
MARGIN (MOBILE) MARGIN (MOBILE)
SEK Million SEK Million
1 600 60% 1 600 60%

1 200 45% 1 200 45%

800 30% 800 30%

400 15% 400 15%

0 0% 0 0%
Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12
EBITDA (left) EBITDA (left)
EBITDA margin (right) EBITDA margin (right)

45

Agenda

• About Q1 2012



46

Concluding remarks

• Create a strong network based
operator in Norway

• Start exploiting 4G services in
Sweden

• Evaluate MNO opportunities in the
Netherlands

• Complete the launch of mobile
services in all regions in
Kazakhstan

• Progress within technology
neutrality

47

Norway: Current market positions
High perceived price

Low perceived High perceived
quality/service quality/service

Low perceived price

50

Currency-adjusted sales and EBITDA

CURRENCY-ADJUSTED SALES CURRENCY-ADJUSTED EBITDA
SEK Million SEK Million

15 000 3 000

2 500 + 1%
12 000
+ 8% 2 000
9 000
1 500
6 000
1 000
3 000 500

0 0
Q1 11 Q1 12 Q1 11 Q1 12

51

Group mobile EBITDA
GROUP MOBILE EBITDA
SEK Million

2 500 35%

2 000 28%

1 500 21%

1 000 14%

500 7%

0 0%
Q1 11 Q2 11 Q3 11 Q4 11 Q1 12

Mobile EBITDA, own infrastructure Mobile EBITDA, MVNO

Mobile EBITDA margin, own infrastructure (%) Mobile EBITDA margin, total group (%)

* Norway, Netherlands and Germany are treated as MVNO
52

Tele2 First quarter 2012

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