CMD2011 - Dmitry Strashnov - Market Area Russia
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Capital Markets Day 2011 Market Area Russia Dmitry Strashnov
Transcript of CMD2011 - Dmitry Strashnov - Market Area Russia
Capital Markets Day 2011
Market Area RussiaDmitry Strashnov
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July 2011
Short and Medium Term Focus1. Continue strong growth in customer intake, maximizing the
2G opportunity
2. Ensure that newcomer and challenger regions reach the same operational trends as old regions
3. Evaluate possibilities to expand carefully its operations through new licenses as well as by complementary acquisitions
Market Area OverviewPopulation Appr. 140 million
Tele2 Russia:
43 regions of Russian Federation 20.2 million subscribers Mobile operator #4 in Russia in terms
of subscribers and revenue
Represents 29% of total net sales Q2 2011
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Real GDP GDP Per CapitaUSD (Thousands)
CPI Inflation Unemployment
Macroeconomic KPIs
2007 2008 2009 2010 2011 20120%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2007 2008 2009 2010 2011 20120
2
4
6
8
10
12
14
16
18
2007 2008 2009 2010 2011 20120%
2%
4%
6%
8%
10%
12%
14%
16%
2007 2008 2009 2010 2011 2012-10%-8%-6%-4%-2%0%2%4%6%8%
10%
4
0
50
100
150
200
250
0%
40%
80%
120%
160%
200%
152173
188208 219 226 228 230 231 232
105%119%
129%143% 151% 158% 160% 161% 162% 163%
Total subs in market Penetration in Russia, %
Russian Mobile Market
-20%
0%
20%
40%
60%
80%
100%
Tele2
MegaFon
Vimpelcom
MTS
Subscriber Market Share Evolution
Net Additions
0
50
100
150
200
250
300
350
400
MTS
Vimpelcom
MegaFon
Tele2
Mobile Subscribers and PenetrationMillion
ARPU EvolutionRUR/month
2Q093Q094Q091Q102Q103Q104Q101Q112Q110%
5%
10%
15%
20%
25%
30%
35%
40%
MTS
Vimpelcom
MegaFon
Tele2
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Clear Business Goals Through Evolution
Region’s position Market Share EBITDA No. of regions Targets
DefenderLeader in the region
(avg. 46%) 35%
(avg. 47%)10
Retention,ARPU protection
Challenger 20% (avg. 31%)
< 35%(avg. 31%)
17Subscribers acquisition,
retention
Newcomer < 20% (avg. 17%)
< 0 16 Subscribers acquisition
Defender
Challenger
Newcomer
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Current Mobile Frequencies Allocation
Tele2 frequencies by regions
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Old Regions: Continuous Customer Growth
RUR
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
0
100,000
200,000
300,000
400,000
500,000
600,000
Customer IntakeSubscribers
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
10,000,000
11,000,000
12,000,000
13,000,000
14,000,000
15,000,000
Subscriber BaseSubscribers
ARPU
Q2-09Q3-09Q4-09Q1-10Q2-10Q3-10Q4-10Q1-11Q2-110%
5%
10%
15%
20%
25%
30%
35%
Annulized Churn
Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11195
200
205
210
215
220
225
230
235
210
218
224
216
229 231 231
220
232
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EBITDA
21%
26%
25%
25%
3%
Market Shares – Revenue** June 2011
* A
C&
M C
onsu
lting
; Tel
e2 R
ussi
a in
tern
al r
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rch,
Jun
e 20
11**
J’S
on &
Par
tne
rs,
Cel
lula
r M
arke
t in
Rus
sian
reg
ions
, 2Q
201
1
RUR (Thousands)
18%
22%
17%
41%
2%Market Shares – Subscribers*
June 2011MTS
BeeLine
Megafon
TELE2
Local operators
Revenue
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
30%
35%
40%
45%
50%
55%
EBITDAEBITDA %
RUR (Thousands)
Old Regions: Solid Profitability Profile
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
6,000,000 6,500,000 7,000,000 7,500,000 8,000,000 8,500,000 9,000,000 9,500,000
10,000,000 10,500,000
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New Regions: Sustainable Customer Base Growth
RUR
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
0
200,000
400,000
600,000
800,000
1,000,000
SubscribersCustomer Intake
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
SubscribersSubscriber Base
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
80
100
120
140
160
180
200
ARPU
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
20%
40%
60%
80%
100%
Annulized Churn
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New Regions: Profitability GrowthEBITDA and EBITDA margin
25%
23%41%
10%
Market Shares - Revenue** June, 2011
* A
C&
M C
onsu
lting
; Tel
e2 R
uss
ia in
tern
al r
esea
rch,
Jun
e 20
11**
J’S
on &
Par
tner
s, C
ellu
lar
Mar
ket
in R
ussi
an r
egio
ns,
2Q 2
011
RUR (Thousands)
35%
25%
21%
20%
Market Shares - Subscribers* June, 2011
MTS
BeeLine
Megafon
TELE2
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
Revenue
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
-800,000
-600,000
-400,000
-200,000
0
200,000
-350%
-300%
-250%
-200%
-150%
-100%
-50%
0%
50%
EBITDAEBITDA %
RUR (Thousands)
25%
10%
23%41%
Market Shares – Subscribers* Market Shares – Revenue**June 2011 June 2011
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Great Potential in New Regions 60% 51% 49% 47% 44% 44% 44% 44% 43% 39% 37% 37% 37% 35% 31% 28% 32% 29% 28% 27% 22% 22% 21% 20% 20% 20% 19% 19% 18% 15% 14% 13% 12%
0%20%40%60%80%
46%35% 35% 35% 34% 30% 30% 29% 28% 27% 27% 23% 21% 20% 19% 15% 18% 15% 15% 14% 14% 13% 12% 12% 10% 10% 10% 9% 8% 8% 8% 8% 7%
0%10%20%30%40%50%
98%95%95%95%93%92%90%89%88%88%87%87%87%86%82%81%75%87%82%81%80%80%80%80%78%76%75%75%72%72%
61%60%57%56%
50%60%70%80%90%
100%
Market Share - Subscribers
Market Share - Revenue
Brand Awareness
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Russian Mobile Market Forecast
* A
naly
sis
Mas
on,
Str
ateg
y &
Dev
elop
men
t D
pt.
est
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20200
100
200
300
400
500
600
2G+4G3G
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20200
50
100
150
200
250
300
350
400
450
2G
3G
4G
Voice Traffic Forecast*Billion minutes
Billion minutes
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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 7 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
Regulatory Update
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