Tele2 Россия / VTB deal
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Transcript of Tele2 Россия / VTB deal
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.
4
Tele2 has Agreed to Sell Tele2 Russia to VTB
Group
Transformed Tele2 Poised for
Continued Success
• Attractive and diversified market mix and a strong spectrum portfolio driving growth
• Strong balance sheet will enable Tele2’s strategic flexibility and possibilities of
maintaining an attractive shareholder remuneration policy
Successful Monetisation &
Shareholder Returns
• Monetisation of Tele2’s 12 years of investing and building a successful business in
the Russian market. Total investments amount to SEK 15.4 billion and total return,
including proceeds from sale, amount to SEK 31.9 billion
• 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
Attractive Value
• 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
• AV/EBITDA 2012 4.9x
• Capital gain of SEK 15.6 billion
Notes
1. All values converted from USD using current SEK/USD FX rate of 6.48
5
VTB Group
History
• 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
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*
*by Private Equity International Magazine
Investment focus
• The current portfolio of private equity investments is comprised of companies operating
across a variety of industries, including TMT and Media
• Such investments include IT services companies EPAM and Luxoft, advertising company
Russ Outdoor, integrated telecoms operator Vivacom and others
Investment holding period
and governance
• 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
portfolio companies, by helping develop growth strategies, creating consolidation
opportunities and improving efficiencies
• 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
6
Background of the Transaction
Value maximisation for Tele2 and its shareholders
Expeditious process with minimal disruption to the operations of Tele2 Russia
Deal certainty, particularly with regards to financing and regulatory considerations
Strong balance sheet for Tele2 Group, SEK 12.5 billion distribution to shareholders, while maintaining flexibility to pursue growth opportunities beyond current footprint
7
Tele2 Russia has Shown Stellar Growth
Since its Entry into the Market
• Tele2 enters Russian market via acquisition of 12 regional
mobile operators
• Launch of GSM networks in Russia
• Acquires a cellular operator in Voronezh Region
• Acquisition of Teleset’s mobile network in the region of Kaliningrad
• Launch of network in the Krasnodar Region and Adygei Republic
• The company continues to invest in rollout, despite challenging economic conditions
• launches a GSM network in
Voronezh Region and
acquires a cellular operator in
Lipetsk
• Acquires four GSM operators
in Arkhangelsk, Murmansk
and Novgorod Regions and in
the Komi Republic
• Lipetsk Region and Komi
Republic relaunched under
Tele2 brand
174 208 486 1 344
3 274
6 453
8 560
10 422
14 451
18 438
20 636
22 716
0
7 000
14 000
21 000
28 000
2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A
Subscribers ‘000s
Revenue (1)
(RUB Bn)
YoY Growth
2.1
80%
1.2
n.a.
1.2
4%
1.2
(2%)
4.1
71%
10.3
151%
18.1
76%
25.3
40%
29.4
16%
42.7
45%
51.9
22%
59.5
11%
EBITDA (1)
(RUB Bn)
% Margin
(0.7)
(35%)
0.3
25%
0.3
25%
(0.2)
(11%)
(0.6)
(15.%)
2.1
20%
5.8
32%
8.6
34%
9.7
33%
14.9
35%
20.3
39%
21.7
37%
Phase 1
Initial Launch
Phase 2
Market Penetration
Phase 3
Market Expansion
2001- 2004 2005-2006 2007-2012
Source: Company Information
Notes
1. For reference current RUB/SEK FX rate of 0.20942
8
Transformed Tele2 Group
(SEKm) SE NL NO KZ HR
Rank 2/4 4/4 3/3 3/4 3/3
Sales 12,699
(41%)
5,267
(17%)
4,749
(15%)
957
(2%)
1,321
(4%)
EBITDA 3,365
(54%)
1,549
(25%)
214
(3%)
-387
(n/a)
60
(1%)
Nr. of FTE's 1,576 1,016 437 663 133
Nr. of Subs
(millions) 4.6 1.0 1.2 3.4 0.8
(SEKm) LAT LIT EST GER AUS
Rank 2/3 1/3 2/3 n/a n/a
Sales 1,036
(4%)
1,206
(4%)
886
(3%)
946
(3%)
1,353
(4%)
EBITDA 358
(6%)
433
(7%)
236
(4%)
278
(4%)
333
(5%)
Nr. of FTE's 275 103 272 82 355
Nr. of Subs
(millions) 1.0 1.8 0.5 0.8 0.3
2012 Full Year Financials
9
Tele2 Well-Positioned for Future Growth
Leading Infrastructure-Based Challenger
with an Attractive Market Mix
Uniquely Positioned to Capitalize on Mobile
Data and Internet Growth
Strong Opportunities for Enhanced Cost
Efficiency Unique Position for Continued Growth
1 2
3 4
10
0%
5%
10%
15%
20%
25%
30%
Q2-08 Q2-09 Q2-10 Q2-11 Q2-12
Price Perception – Postpaid Sweden Percent of respondants
Telia
Telenor
Tele2
3
Comviq (Tele2)
Halebop
Leading Infrastructure-Based
Challenger with an Attractive Market Mix
Infrastructure-based challenger
Attractive macroeconomic footprint
Best commercial offer in the market
Uniquely positioned to gain market
share from incumbents
Strong Spectrum Portfolio Best Commercial Offer in the Market
Attractive Market Mix
Tele2
Telia
11
3G 4G
Tele2 Sweden - Mb/week
France
Spain
UK
Italy
Sweden
Finland
0% 5% 10% 15% 20% 25% 30% 35%
•
Demand Growth – European Mobile Data Usage
Tele2 Kazakhstan – Mb/week MBB Penetration (“Large Screen Data Only”)
EUR/Sub/month
Uniquely Positioned to Capitalise on
Mobile Data and Internet Growth
Aug 2011 May 2012 Jan 2013
2012-1 2012-13 2012-25 2012-37 2012-49 2013-9
Netherlands
Austria
Germany
0,0
2,0
4,0
6,0
8,0
10,0
2009 2010 2011 2012 2013e 2014e 2015e 2016e
Smartphone 3G Tablets and dongles 3G Smartphone LTE Tablets and dongles LTE
Pb
Source: Internal company information, Arthur D little , BNP Paribas and Analysys Mason
12
33.1% 30.8%
28.0% 27.1% 25.8% 25.6%
23.2% 23.1% 22.3% 21.7%
Strong Opportunities for Enhanced
Cost Efficiency
-0.9%
AT Kearney cost benchmark
Reduction in Network Cost Cost Leadership
Best practice in Swedish network JV
structure Significant mobile network capex and opex
savings
Netherlands Opportunities to co-build due to obligation to
share sites and towers
T2 2010 T2 2011
JV's Capex
& Opex Tele2 share
of JV's Capex
& Opex
Tele2 saving
If Tele2 would
build own
network
Capex & Opex
100% 40%
50%
90%
Principle of JV Saving CAPEX & OPEX
Cost Leadership Tele2 continues to reduce the cost gap but
is still second best
13
Unique Position for Continued Growth
Revenue Tele2 Group ex. Russia SEK Bn
29,9 29,5 30,7
0
10
20
30
40
2010A 2011A 2012A 2015E
EBITDA Tele2 Group ex. Russia SEK Bn
5,8 6,7 6,2
0
2,5
5
7,5
10
2010A 2011A 2012A 2015E
• Tele2 expects to achieve compounded
annual revenue growth for the Group of
between 5 – 7 percent until year 2015,
reaching at least SEK 35.6 billion.
• Tele2 expects to achieve compounded
annual EBITDA growth for the Group of
between 10 – 12 percent until year 2015,
reaching at least SEK 8.3 billion.
• All operations in the Group should have at
least 20 (earlier 24) percent return on
capital employed (ROCE).
• The positive operational development over
the next three years will predominantly be
driven by strong mobile development in
Sweden, the Netherlands, Norway and
Kazakhstan.
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
15
16.3
9.0
3.2
-23.0 12.5
Pro forma net debtQ4'12 incl. Dutch
LTE license
Proceeds from sale Ordinary dividend Extraordinarydividend
Net debt excl. Tele2Russia
Net debt development scenario SEK billion
1.75x EBITDA 2012
1.25x EBITDA 2012
Net debt excl.
Tele2 Russia
16
Tele2 to Return SEK 15.7 Bn to its
Shareholders
SEK 12.5 Bn Share
Redemption Program
• 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
per share, totaling SEK 12.5 billion, by means of a redemption of shares
• The redemption of shares will be subject to approval at the Extra General
Meeting, which will be called by the Board of Directors upon closing of the
transaction
• The dividend for 2012 of SEK 7.10 per share, totaling SEK 3.2 billion, will be
paid as previously announced
Target Leverage
• The Tele2 Group will maintain its balance sheet target of a net debt to EBITDA
ratio of between 1.25 and 1.75 times over the medium term to cater for an
efficient capital structure
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
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
19