Tele2 AB Q2 2011 presentation

SECOND QUARTER 2011

Tele2 ABJuly 20, 2011

2010-10-202

Agenda

• About Q2 2011

• Financial Review

• Guidance and concluding remarks

2010-10-203

Highlights Q2

Tele2 Group

• Total customer base amounted to more than 32 million customers. Net customer intake for the group in Q2 was 1,052,000 (1,096,000).

• Net sales grew by 6 percent (currency-adjusted), driven by mobile sales.

• EBITDA grew by 7 percent (currency-adjusted).

• EBITDA margin amounted to 27 (27) percent (currency-adjusted).

2010-10-204

Highlights Tele2 Russia

• 720,000 (1,113,000) new customers in Q2 2011.

• Net sales grew by 23 percent (currency-adjusted).

Moscow

Q2 10 Q3 10 Q4 10 Q1 11 Q2 1115

16

17

18

19

20

21

22

CUSTOMER BASEMillion customers

Q2 10 Q3 10 Q4 10 Q1 11 Q2 110

1,000

2,000

3,000

4,000

5,000

31%

32%

33%

34%

35%

36%

37%

38%

EBITDA 12'M rolling (left) EBITDA margin 12'M rolling (right)

EBITDA 12’M ROLLING AND EBITDA MARGIN 12’M ROLLING

2011 guidance

SEK Million Percent

2010-10-205

3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Apr11 May110%

10%20%30%40%50%60%70%80%90%

100%

NET ADDITIONS

Mobile market overview Russia

Source: AC&M – 1Q11 Report, Analysys Mason – Russia Country report, Dec 2010*Preliminary estimate

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11180

190

200

210

220

230

240

250

180

190

200

210

220

230

240

250

MoU (left-hand side) ARPU (right-hand side)

MoU AND ARPU RUSSIAMin

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

*4%

6%

8%

10%

12%

14%

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11200

400

600

800

1,000

1,200

1,400

NET INTAKE TELE2 RUSSIAThousands

RUB

Mobile TeleSystemsVimpelcomMegafon Tele2

QUARTERLY CHURN TELE2 RUSSIAPercent

Percent

2010-10-206

SUBSCRIBER BASE GROWTH YoY, 1Q11

0% 5% 10% 15% 20% 25%

3%

3%

9%

23%

0% 10% 20% 30% 40%

12%

5%

12%

30%

• Best in the market growth rates

• Price/quality balance – a primary reason for growth

• Improving EBITDA margin despite of subscriber base growth

Tele2 Russia’s performance vs. competitors

REVENUE GROWTH YoY, 1Q11

Source: AC&M Consulting 1Q11 Report; Company data

2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q1120%

30%

40%

50%

60%

39%

EBITDA MARGINPercent


2010-10-207

Tele2’s regional expansion opportunitiesCOVERAGE MAP

Market Population(million)

Total Market 142

Tele2 operations

61

Won licences 1

Combined Tele2 footprint 62

The results of the first GSM tender: Tele2 got licences in 6 new regions in the Far East

Moscow

2010-10-208

Highlights Tele2 Sweden • Increased mobile revenue growth of 10 percent.

• 32,000 (45,000) mobile postpaid customers added.

• Mobile EBITDA margin amounted to 32 (34) percent.

Q2 10 Q3 10 Q4 10 Q1 11 Q2 112,000

2,100

2,200

2,300

2,400

0%2%4%6%8%10%12%14%16%18%

MOBILE NET SALES AND MOBILE YoY NET SALES GROWTH

Mobile net sales (left)Mobile YoY net sales growth (right)

MOBILE EBITDA 12’M ROLLING AND MOBILE EBITDA MARGIN 12’M ROLLING

PercentPercentSEK Million

Q2 10 Q3 10 Q4 10 Q1 11 Q2 112,600

2,650

2,700

2,750

2,800

2,850

20%

25%

30%

35%

40%

45%

50%

Mobile EBITDA 12'M rolling (left)Mobile EBITDA margin 12'M rolling (right)

SEK Million

2010-10-209

Smartphones are taking over the scene

SHIPMENT OF HANDSETS TELE2 SWEDENPercentage of total shipments

Mar 11 Apr 11 May 11 Jun 1150%

60%

70%

80%

90%

100%

Mar 11 Apr 11 May 11 Jun 1130%

35%

40%

Smartphone Regular

INSTALL BASE TELE2 SWEDEN (POSTPAID)Percentage of total installed base

Smartphones corresponded to 88% of Tele2’s total shipments of handsets in June 2011.

2010-10-2010

Smartphones are driving data consumption

Apr 11 May 11 June 110

100,000

200,000

300,000

400,000

500,000

600,000

0

100

200

300

400

500

600

Android Users iOS Users Android Data iOS Data

USERS AND DATA CONSUMPTION: ANDROID vs iOS

(TELE2 SWEDEN)Users MB

In June 2011, the average Tele2 iOS user consumed 91% more data than the average Tele2 Android user.

Approximately 50% of all smartphones sold were Apple-branded.

SALES OF HANDSETS BY BRAND(TELE2 SWEDEN, OWN SALES CHANNELS)

Apple

Samsung

HTC

Sony Ericsson

ZTENokia

LG

Motorola

BlackBerry

Rim

Percent

Jan 2011 Feb 2011

Mar 2011

Apr 2011 May 2011

Jun 20110%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010-10-2011

The 4G roll-out continues

99%* 4G

coverage

End of 2012

2011

*Percentage of the population

4G roll out status Q2 2011:Roll out completed in 14

cities covering 40% of the population

• Next generation’s mobile broadband already launched.

• We see 4G handsets and tablets coming in 2H 2011.

2010-10-2012

• The Netherlandso BBned integration fully completed.

- Restructuring cost of SEK 48 million in Q2 affecting EBITDA.

• Germanyo Maintained leading position in the CPS

segment. Improved EBITDA contribution to 38.6% in Q2.

o Positive EBITDA contribution in fixed broadband due to wholesale agreement.

• Austriao The focus on expanding the B2B

segment resulted in several major customer contracts.

o Financial development continued to improve versus last year.

Highlights Tele2 Western Europe

Q2 10 Q3 10 Q4 10 Q1 11 Q2 110

500

1,000

1,500

2,000

2,500

EBITDA 12'M ROLLINGSEK million

Netherlands Austria Germany

2010-10-2013

Licence Renewal / Frequency AuctionA

uction 2015A

uctioned 2010A

uction early 2012

• In Q1 2012, all existing spectrum in the 900 and 1.800 MHz bands will be redistributed.

• All spectrum licenses are 'technology neutral‘.

• A new block of 2x30 MHz spectrum in the 800 MHz 'Digital Dividend' band will be auctioned with a block exclusively reserved for newcomers to bid on.

2010-10-2014

Highlights Tele2 Baltic Region

• Stabilizing economy leading to better operationalenvironment.

• Positive net customer intake of 75,000 customers inthe Baltic region in Q2.

• Strong EBITDA margin of 33% in the Baltic region.

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11-200

-100

0

100

200

300

EBITDA – CAPEX SEK Million

EBITDA CAPEX

EBITDA - CAPEX

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11-40

-20

0

20

40

60

80

NET INTAKEThousands

Estonia Lithuania Latvia

2010-10-2015

Highlights Tele2 Croatia

• Goal to deliver positive free cash flow 2H 2011.

• Solid net intake of 27,000 customers in Q2.

• Tele2 brand re-launched with new communicationplatform.

EBITDA – CAPEXSEK Million

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11500

600

700

800

0

10

20

30

40

50

60

70

80

90

CUSTOMER STOCK AND NET INTAKE

Customer stock (left) Net intake (right)Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

-80

-60

-40

-20

0

20

40

EBITDA CAPEX EBITDA - CAPEX

ThousandsThousands

2010-10-2016

Highlights Tele2 in Kazakhstan

• Commercial launch of the Tele2 brand in five regions.

• Strong net intake of 355,000 (-48,000) customers.

CUSTOMER STOCK AND NET INTAKE

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11-100

100

300

500

700

900

-100

0

100

200

300

400

Customer stock (left) Net intake (right)

ThousandsThousands

2010-10-2017

Agenda

• About Q2 2011



2010-10-2018

Q2 2011 Group results

SEK million Q2 11 Q2 10 Change %

Net Sales 9 998 10 539

EBITDA 2 711 2 687 0.9%

- EBITDA margin (%) 27% 25%

Depreciation and Joint Ventures -935 -920

- Depreciation of Net sales (%) 9% 9%

One-off items -57 527

EBIT 1 719 2 294 -25%

Normalized EBIT 1 776 1 767

- Normalized EBIT margin (%) 18% 17%

Financial items -214 -224

Taxes -397 -421

Net profit/loss 1 108 1 649

Net result, discontinued operations 5 -5

Net result total operations 1 113 1 644

One-off item of 527 affecting Q210 EBIT

2010-10-2019

Currency movements (vs. SEK)

YoY difference in YTD Ave FX rates, 2011 vs. 2010

EUR -8.7%

RUB -9.3%

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

End of Q2 spot rate vs. 31/12-2010

EUR 1.6%

RUB 1.5%

2010-10-2020

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

cc

CURRENCY-ADJUSTED EBITDA, TOTAL +7 %SEK Million

CURRENCY-ADJUSTED SALES, TOTAL +6.3 %SEK Million

c

MA Western Europe MA Central EuropeMA Russia MA Nordic Kazakhstan

Q2 10 Q2 110

2000

4000

6000

8000

10000

12000

+1%

+23%

-1%

+3%

Q2 2010 Q2 2011

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

+1%

-2%

+32%

+2%

2010-10-2021

Taxes

Taxes in income statement YTD Q2 11 Q2 10

Normal -818 -397 -421

One-Off - - -

Total -818 -397 -421

Taxes in cash flow Q2 11 Q2 10

Normal -520 -325 -195

Deferred tax assets amounted to SEK 3.2 (3.1) billion

2010-10-2022

SEK million Q2 11 Q2 10

OPERATING ACTIVITIES

Cash flow from operations, before paid tax 2 604 3 065

Cash flow from operations, paid taxes -325 -195

Changes in working capital -75 52

Cash flow from operating activities 2 204 2 922

INVESTING ACTIVITIES

CAPEX -1 261 -909

Cash flow after CAPEX 943 2 013

Cash flow for Q2 2011

Negative change in working capital affected by increased instalment sales of handsets

2010-10-2023

Q2 10 Q3 10 Q4 10 Q1 11 Q2 110.0

2,500.0

5,000.0

7,500.0

10,000.0

12,500.0

15,000.0

17,500.0

20,000.0

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

Pro Forma Net Debt Pro Forma Net Debt / EBITDA 12'M ROLLING Upper limitLower limit Linear (Lower limit)

Group financial profilePROFORMA NET DEBT INCL. JV / EBITDA 12’M ROLLING

SEK Billion Ratio

Ordinary dividendExtraordinary dividend

Upper limit

Lower limit

2010-10-2024

Bal. sheet consideration / Fin. leverage

Shareholder remuneration

Cash / Buffer

M&A / New growth opportunities

When available, invest in value accretive M&A or new business opportunities

meeting Tele2’s strict financial hurdles

Enhance shareholder value by distributing recurring cash to shareholders

Retain financial buffer

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

CASH

GENERATION

2010-10-2025

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.”

2010-10-2026

Debt profile June 2011

8.8 bn0.9 bn

2.9 bn

2.4 bn

Gross debt position SEK 15.0 bn

Net debt amounts to 12.9 bn

RCF (SEK) Kazakhstan debt

Rubel bond Off balance sheet

2010-10-2027Sources: Raiffeisenbank. Calculated by adding “fair” spread differential of 40bps to nearest Vimpelcom and MTS bond yields to account for difference in maturity compared to Tele2 Russia bonds.

Fairly adjusting for differences in maturity, the placement was executed at a yield 5bps tighter than Vimpelcom and 12bps wider than MTS

Tele2 Russia Prices in Line with Much Larger Russian Peers

2010-10-2028

Group EBITDA, Sales and Capex

Q2 10 Q3 10 Q4 10 Q1 11 Q2 110

2,000

4,000

6,000

8,000

10,000

12,000

GROUP SALESSEK Million

Q2 10 Q3 10 Q4 10 Q1 11 Q2 110

200400600800

1,0001,2001,4001,600

GROUP CAPEXSEK Million

Q2 10 Q3 10 Q4 10 Q1 11 Q2 110

500

1,000

1,500

2,000

2,500

3,000

0.23

0.24

0.25

0.26

0.27

0.28

GROUP EBITDASEK Million / Percent

Q2 Q3 Q4 Q1 Q210.0%

15.0%

20.0%

25.0%

ROCEPercent

Mobile Fixed telephony OtherFixed broadband



2010-10-2029

Group mobile EBITDA

Q2 10 Q3 10 Q4 10 Q1 11 Q2 110

500

1,000

1,500

2,000

2,500

0%

5%

10%

15%

20%

25%

30%

35%

40%

GROUP MOBILE EBITDASEK MILLION / PERCENT

Mobile EBITDA on own infrastructure Mobile EBITDA (MVNO)

Mobile EBITDA margin on own infrastructure Total mobile EBITDA margin

2010-10-2030

Sweden mobile revenue explained

Extern

al re

venu

e Q2

2010

Non re

curri

ng

Adjus

ted

exte

rnal

reve

nue

Under

lying

mob

ile

Insta

lmen

t & JV

rev

Extern

al re

venu

e Q2

2011

2096

-51

2045

+100 (+5%)+162 (+8%)

2307SWEDEN MOBILE REVENUE WATERFALL

SEK MILLION

2010-10-2031

Sweden mobile EBITDA explained

EBITDA Q2 2010

GM2 SUNAB N4M Expansion cost

Call center service

Other EBITDA Q2 2011

722

94 -22-11 -33

-16 1 735

SWEDEN MOBILE EBITDA WATERFALLSEK MILLION

2010-10-2032

Agenda

• About Q2 2011



2010-10-2033

Tele2’s general group targets

• Maintain Best Deal position.

• Targeting a long-termmobile EBITDA margin on owninfrastructure of at least 35 percent.

• All operations should have the ambition of reaching a ROCE of at least 20 percent.

• The capability to reach a Top 2 position, in terms of customer market share, in an individual country or region.

2010-10-2034

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

• Tele2 expects mobile service revenue to grow with mid single digits (earlier high single digits for mobile revenue)

• Tele2 expects a similar EBITDA contribution in 2011 as in 2010 due to instalments and start up costs related to joint venture Net4Mobility.

Sweden outlook (changed)

2010-10-2035

Tele2 has GSM licences in 43 regions in Russia covering approximately 62 million inhabitants. The following assumptions should be taken into account when estimating the operational performance of the total operations in Russia in 2011:

• Tele2 expects the subscriber base to reach 21 million (earlier 20-21 million) by year-end 2011.

• Tele2 expects ARPU to remain stable in local currency.

• Tele2 expects Russia’s total EBITDA margin to evolve in the range of 38-40 (earlier 36-39) percent.

• Tele2 expects capex in Russia to be approximately SEK 2,000 million by year-end 2011.

Russia outlook (changed)

2010-10-2036

Concluding remarks

Russia• Record EBITDA contribution.

Nordic• Robust mobile revenue growth.

Western Europe• Tele2 Netherlands finalized the integration

of BBned.

Central Europe & Eurasia • Successful launch of Tele2’s operations in

Kazakhstan led to record customer intake.

2011: Also an investment year• Russia

• Kazakhstan

• Sweden

• Norway

In short, all our markets are doing well.

2010-10-2037

Q&A

2010-10-2038

2010-10-2039

APPENDIX

2010-10-2040

Mobile market overview Russia

Source: AC&M Consulting – 1Q11 Report

* FDP Group, 1Q2011

2006 2007 2008 2009 2010 1Q110%

5%

10%

15%

20%

25%

30%

35%

40%

MOBILE MARKET SHAREPercent of active subscribers

2006 2007 2008 2009 2010 1Q110%

5%

10%

15%

20%

25%

30%

35%

MOBILE MARKET SHAREPercent of retail revenues

Average TELE2 share (all Russia): 8.6%Average TELE2 share (old regions): 41%*Average TELE2 share (new regions): 17%*

Average TELE2 share (total 37): 31%*


2010-10-2041

Mobile data market

MTS Vimpelcom Megafon Tele2

11%

8%

13%

9%

BIG4 DATA REVENUE BREAKDOWNPercent of total revenue, Federal, 1Q 11

20%

33%29%

17%

BIG4 DATA REVENUE BREAKDOWN Percent of total revenue, Tele2 Regions, 1Q11

VimpelCom

Megafon

MTS

Tele2

Samma text som Q1

Source: Tele2 regions internal data; J’son & Partners 2011, AC&M Consulting 1Q11 Report;

• EDGE enabled mobile network

• Great price and smart packaging

• Large difference between major cities vs. rural areas

2010-10-2042

Newly introduced cheap smartphones and feature phones suit our customers

• Smartphones are dominating sales.• 50% of the sales of the cheap smartphone ZTE Blade

are to prepaid customers.• iOS has the highest share of sales, but Android still

represents the largest share of our smartphone customer stock.

1 iPhone4 16 GB

2 Huawei U3100

3 Sony Ericsson Xperia Arc

4 Samsung Galaxy S II

5 iPhone4 32 GB

6 Samsung Galaxy S

7 Samsung E1080

8 HTC Incredible

9 Samsung Galaxy Mini

10 ZTE Blade

Top 10 phone sales in Tele2 Stores (Apr-Jun)

In total, 9 out of 10 sold phones are smartphones

Handset trends

2010-10-2043

2001 2002 2003 2004 2005 2006 2007 2008 20090%

20%

40%

60%

80%

100%

FIXED VS. MOBILE PERSPECTIVESWE TELECOM REVENUES (%)

Fixed Mobile

Swedish telecom market trends

Sources: Parella Weinberg Partners , Analysys Mason, PTS

2010 2011 2012 2013 2014 20150

20,00040,00060,00080,000

100,000120,000140,000

MOBILE DATA TB USAGE (RESIDENTIAL)

TERABYTE

Mobile data is increasing, driven by smartphones and

mobile broadband

2010 2011 2012 2013 2014 20150%

10%20%30%40%50%60%70%80%90%

100%

MOBILE CONNECTIONS SWEDENPERCENT

2G 3G 4G

2010-10-2044

2009 2010 2011 2012 2013 20140%

20%

40%

60%

80%

100%

SMARTPHONES vs. FEATURE PHONESShare of total market

Smartphones Feature phones

Smartphones change the customers’ behaviour

More than 60 percent of Tele2’s prepaid customers converting to postpaidchange to a smartphone

The Swedish mobile marketTele2 customers’ demand for data solutions

is increasing rapidly

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

SALES OF DATA PACKAGES

400%

Sources: Analysys Mason; internal company data

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