Tele2 Second quarter 2012

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SECOND QUARTER 2012 Tele2 AB 19 July 2012

Transcript of Tele2 Second quarter 2012

  • 1.SECOND QUARTER 2012Tele2 AB19 July 2012

2. Agenda About Q2 2012 Financial review Concluding remarks2 3. Tele2 Group Q2 Highlights Net customer intake of 1.5 million leading to a total customer base of36.3 million Revenue growth of 10%, amounting to SEK 11,064 (10,078) million EBITDA amounted to SEK 2,715 million, equivalent to a margin of 25% CAPEX amounted to SEK 1,586 million3 4. Market Area Russia: OverviewPopulationAppr. 140 millionTele2 Russia 43 regions of Russian Federation 21.6 million subscribers Mobile operator #4 in Russia in termsof subscribers and revenueRepresents 30% of total net sales Q2 2012Focus Continue to grow customer base and maximize the 2G opportunity Evaluate possibilities to expand carefully through new licenses as well as bycomplementary acquisitions Make progress on technology neutrality4 5. Q2 Highlights Russia Strong customer net intake of 693,000 Increased EBITDA margin of 37% due to lessmarketing spend Robust ARPU development, showing a growthof 5%CUSTOMER BASE andNET SALES and EBITDA andCUSTOMER INTAKEYoY NET SALES GROWTHEBITDA MARGINThousands of customersSEK MillionSEK Million22,000 800 4,000 20% 1,600 42% 3,000 15% 40%21,000 600 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% Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12Customer base (left)Net sales (left) EBITDA (left) 5Customer netYoY net sales EBITDAintake (right)growth (right)margin (right) 6. The Russian mobile market overviewTELE2 SUBSCRIBERS AS PART OF TOTAL RUSSIANMOBILE MARKET NET ADDITIONS Tele2 MegaFonVimpelcom MTS Tele2Million subscribers Thousands of subscribers250 8.6%9.3%8,0005.6% 5.6%7.3%6,0002004,000150 2,0000100-2,00050-4,000Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q209 09 09 09 10 10 10 10 11 11 11 11 12 09 09 10 10 10 10 11 11 11 11 12 12ARPU DEVELOPMENT Tele2 MegaFonTELE2 RUSSIA EBITDA MARGINRUBVimpelcom MTS400 2010 2011 201244%300 5% growth 22940%20036%100 32%028% 2006 2007 2008 2009 2010 Q1 Q2 Q3 Q4 Q1Q2Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec11 11 11 11 12126 Source: Company data, AC&M Consulting 7. Revenue source developmentVOICE and DATA REVENUE SPLIT DEVELOPMENTRUB millions16,0008% 8% 8% 9%12,000 8% 8,000 92% 92% 92%92%91% 4,0000 Q2 11Q3 11Q4 11Q1 12Q2 12 Data access Voice revenue revenueData and voice revenues demonstrate 8% and 15% YoY growthrespectively7 8. Regulatory update: significant developmentsLTE license tenderRegional LTE allocationsRoscomnadzor held tender on LTE for 4 The Regulator officials have recently verballyfederal lots, each 2x7.5 MHz in 800 MHz and stated that they plan to distribute 10 regional2x10 MHz in 2.5-2.7 GHz. Tele2 submitted twoTDD LTE licenses in 2600 Mhz. According tobids. However, Tele2 did not win due to tenderthe Ministry representative this decision mayconditions favoring federal operators.be taken at the forthcoming GKRCh** meeting.Technology neutrality MNP ConsultationsReport from NIIR* ready confirming LTE andThe Prime Minister assigned the direction forGSM can co-exist on the same band.discussions on the MNP introduction. Tele2According tothe Telecom Ministrydelivered proposals on the draft bill andrepresentative LTE 1800 should be included in participated in the working group on thethe agenda for the next GKRCh** meeting technical solution. The expected deadline forMNP introduction is Jan, 2014* NIIR Radio Research and Development Institute8 ** GKRCh State Commission on Radio Frequencies 9. 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 approx. 22 (earlier 21.5-22) million. Tele2 expects ARPU to grow by 3-5 (earlier in low single digits) percent in local currency. Tele2 expects an EBITDA margin of between 37-39 percent. Tele2 expects capex of between SEK 1,300 - 1,500 million.9 10. Market Area Nordic: Overview Population 14.4 million Tele2 Sweden and Tele2 Norway Home market and test bed for new services Represents 40% of total net sales Q2 2012 Sweden 29%; Norway 11% Focus Sweden: Build on mobile growth and 4G roll-out coupled with household / corporatefiber strategy Norway: Roll out own network and focus on bucket-price subscriptions10 11. Q2 Highlights Tele2 Sweden Net sales amounted to SEK 3,209 million andEBITDA amounted to SEK 766 million Mobile revenue grew by 6% and service revenuegrew by 2.3% Net intake in Q2 boosted by temporary campaignon postpaid subscriptions Affecting EBITDA negatively during the quarter New, more diversified pricing plans andinnovative productsCUSTOMER BASE and NET SALES andEBITDA andCUSTOMER INTAKE YoY NET SALES GROWTH EBITDA MARGINThousands of customersSEK MillionSEK Million4,900 804,0004%1,00040%4,800 403,0002%75030%4,700 0 2,0000%50020%4,600 -40 1,000-2% 25010%4,500 -80 0-4%0 0%Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Customer base (left) MobileFixed broadband Fixed telephony Other 11Customer netYoY net sales EBITDA intake (right)growth (right)margin (right) 12. New tariff models Volym Lg Volym Mellan Volym Hg 300 min minutes 1000 minutes 3000 minutes 300 SMS & 1000 SMS & 3000 SMS & MMS MMSMMS 1 GB data 3 GB data 5 GB data12 13. Innovative packages and products Prepaid RoamingWyWallet +46 app smartphone buckets campaigns13 14. Smartphone market development SMARTPHONE INSTALLED BASE* 100%Sales of top ten mobile phones90% Tele2 Sweden (Q2 2012) 80%70%60%1. iPhone 4S 16GB 50%2. Samsung Galaxy Gio 40%3. HTC One X30%20%4. Sony Xperia S10%5. Samsung Galaxy S2 0%1106 1107 1108 1109 1110 1111 1112 1201 1202 1203 1204 1205 12066. Samsung Galaxy S3Regular handset Smartphone7. Samsung Galaxy S2 LTE8. Samsung Galaxy Ace9. Samsung E108010. iPhone 4S 32GB * Postpaid residential, quantity of handsets14 15. Mobile EBITDA development 300 35% 34% 40% 33% 29% 30% 200 17%16%20% 100 10% 0 0% Jan AC Feb AC Mar ACApr ACMaj AC Jun ACEBITDAEBITDA margin adjusted (secondary axis)15 16. Tele2 Sweden forward looking statementThe following assumptions shouldbe taken into account whenestimating the operationalperformance of the Swedish mobileoperations in 2012: Tele2 expects service revenue to growby approximately 3-4 (earlier 3-5)percent. Tele2 expects an EBITDA margin ofbetween 30-32 percent assuming astable market environment.16 17. Q2 Highlights Tele2 Norway Integration of Tele2 Norway completed Good net intake of 23,000 mobile customers Tele2 Norway reported net sales ofSEK 1,208 million, of which SEK 1,137 million was mobilerevenue Mobile EBITDA contribution was SEK 81 (15) million Interconnect was lowered by July 1 to NOK 0.25 (0.40) andNOK 0.60 (0.70) for Tele2 Norway and Network NorwayrespectivelyCUSTOMER BASE and NET SALES and EBITDA andCUSTOMER INTAKE YoY NET SALES GROWTHEBITDA MARGINThousands of customersSEK Million SEK Million1,600 201,60080% 10010%1,200 101,20050%505% 8000800 20%0 0% 400-10400 -10% -50 -5%0 -20 0-40% -100-10%Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12Customer base (left)MobileFixed broadband Fixed telephony Other 17 Customer net YoY net salesEBITDAintake (right) growth (right) margin (right) 18. Tele2 Norway forward looking statementThe following assumptions shouldbe taken into account whenestimating the operationalperformance of the total operationsin Norway in 2012: Tele2 expects a total revenue ofbetween SEK 4,800-5,000 (earlier5,000-5,200) million. Tele2 expects an EBITDA margin ofbetween 2-3 percent. Tele2 expects capex of between SEK850-950 million.18 19. Market Area Western Europe: Overview Population 106 million Leading the group in business to business services and consumer fixed broadband Represents 17% of total net sales Q2 2012 Netherlands 12%; Germany 2%; Austria 3% Focus Netherlands Grow in mobile and B2B Austria B2B & Integration of Silver Server Germany Grow Fixed Via Mobile product19 20. Q2 Highlights Tele2 Netherlands Stable financial performance despite tough marketconditions Back to growth in total customer base Net intake of 32,000 customers in mobile Significant portion in high-value mobile post-paid segment Strong intake in the B2B segmentCUSTOMER BASE and NET SALES and EBITDA andCUSTOMER INTAKE YoY NET SALES GROWTHEBITDA MARGINThousands of customersSEK MillionSEK Million1200201,60010% 800 40% 9005 1,2005%600 30% 400 20% 600-10 8000% 200 10% 300-25 400-5%00% Q2 11 Q3 11 Q4 11 Q1 12 Q2 120 -40 0-10%-200-10%Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12Customer base (left) MobileFixed broadband Fixed telephonyOther 20 Customer netYoY net sales EBITDAintake (right)growth (right)margin (right) 21. Q2 Highlights Tele2 Germany and Tele2 Austria Both Austria and Germany show stable profitabilty Tele2 Germany: High-value Fixed via Mobile product still showing steady growth Tele2 Austria: Integration of Silver Server on track. Solid performance in the B2B segment TELE2 GERMANY TELE2 AUSTRIA EBITDA and EBITDA MARGINEBITDA and EBITDA MARGIN SEK Million SEK Million 120 40% 120 40%90 30%90 30%60 20%60 20%30 10%30 10% 0 0%0 0% Q2 11 Q3 11 Q4 11Q1 12Q2 12 Q2 11 Q3 11 Q4 11Q1 12Q2 12 EBITDA (left) EBITDA (left)21EBITDAEBITDAmargin (right)margin (right) 22. Market Area Central Europe and Eurasia: Overview Population 28 million Represents 12% of total net sales Q2 2012 Estonia 2%; Latvia 2%; Lithuania 3%; Croatia 3%; Kazakhstan 2% Focus Continue to grow rapidly in Kazakhstan Efficiency improvements in Baltics Drive improvement in revenue, profits and market share in Croatia22 23. Q2 Highlights Tele2 Estonia Stable financial performance and profitability in acompetitive market Tele2 Estonia maintains a positive net intake of mobilecustomers Successful integration of Televrgu completed Modernization and 4G roll-out currently ongoingMOBILE CUSTOMER BASENET SALES andEBITDA andand CUSTOMER INTAKE YoY NET SALES GROWTH EBITDA MARGINThousands of customersSEK MillionSEK Million 60030300 20% 80 40% 45020225 10% 60 30% 30010150 0%40 20% 150075 -10%20 10%0 -10 0 -20% 0 0%Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Mobile customer base (left)Net sales (left)EBITDA (left) 23 Customer netYoY net salesEBITDAintake (right)growth (right) margin (right) 24. Q2 Highlights Tele2 Latvia Tele2 Latvia maintains a high efficiency in a competitive market EBITDA margin amounted to 36% Customer intake of 11,000 Rolling out 4G when commercially attractiveCUSTOMER BASE and NET SALES andEBITDA andCUSTOMER INTAKE YoY NET SALES GROWTH EBITDA MARGINThousands of customersSEK MillionSEK Million1,200 40400 -5%120 40% 90020300 -10%90 38% 6000 200 -15%60 36% 300-20 100 -20%30 34%0 -40 0 -25% 0 32%Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Customer base (left) Net sales (left)EBITDA (left) 24Customer net YoY net salesEBITDA intake (right) growth (right) margin (right) 25. Q2 Highlights Tele2 Lithuania Significant intake of 20,000 mobile customers EBITDA margin amounted to 38% Strong performance since inception in 2000MOBILE CUSTOMER BASE NET SALES andEBITDA andand CUSTOMER INTAKEYoY NET SALES GROWTH EBITDA MARGINThousands of customers SEK MillionSEK Million2,000 35 400 5% 160 50%1,500 25 300 0% 120 40%1,000 15 200 -5% 80 30%500 5100 -10%40 20%0 -5 0 -15% 0 10%Q2 11 Q3 11 Q4 11 Q1 12 Q2 12Q2 11 Q3 11 Q4 11 Q1 12 Q2 12Q2 11 Q3 11 Q4 11 Q1 12 Q2 12Mobile customer base (left)Net sales (left)EBITDA (left) 25Customer netYoY net salesEBITDA intake (right)growth (right) margin (right) 26. Tele2 Lithuania a success story MARKET SHARE DEVELOPMENT MARKET SHARE DEVELOPMENT (revenue; 100% of the market)(EBITDA; 100% of the market) 60%60% 50%50% 40%40% 30%30% 20%20% 10%10%0%0%Q12007 Q22008 Q3-2009 Q4-2010 Q1-2012 Q12007 Q22008 Q3-2009 Q4-2010 Q1-2012 Tele2Company A Company BTele2Company A Company B Tele2 Lithuania has caught up with its competitors in terms of Revenue market share, and surpasses them in terms of EBITDA market share26 27. Q2 Highlights Tele2 Croatia Significant intake of 43,000 mobile customers New CEO started in June CUSTOMER BASE andNET SALES andEBITDA andEBITDA-CAPEX CUSTOMER INTAKEYoY NET SALES GROWTH EBITDA MARGIN Thousands of customers SEK MillionSEK Million SEK Million1,00090 5005% 60 12% 50 750 30 3750% 45 9%25 500 -30250-5%30 6% 0 250 -90125-10% 15 3%-25 0 -150 0-15%0 0%-50 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1Q2 Q2 Q3 Q4 Q1 Q2 11 11 11 12 12 11 11 11 12 12 11 11 11 1212 11 11 11 12 12 EBITDACustomer base (left) Net sales (left) EBITDA (left)27 CAPEXCustomer net YoY net sales EBITDAintake (right) growth (right)margin (right)EBITDA-CAPEX 28. Tele2 Croatia forward looking statementThe following assumption shouldbe taken into account whenestimating the operationalperformance of the Croatian mobileoperations in 2012: Tele2 expects Croatia to reach anEBITDA margin of between 4-6 (earlier20 percent by Q3 2013) percent in2012.28 29. Q2 Highlights Tele2 Kazakhstan Commercial launch of Tele2 brand completed in all regions ofKazakhstan Strong net intake of 759,000 customers Total number of customers amounted to 2.5 millionCUSTOMER BASE and NET SALES andEBITDA andCUSTOMER INTAKE YoY NET SALES GROWTH EBITDA MARGINThousands of customersSEK MillionSEK Million 1600%2,500 1,000 300 550%2,000 800 80-100%225 400%1,500 600 0-200%150 250%1,000 400-80 -300% 75 100% 500200 -160 -400% 00 0 -50%Q2 11 Q3 11 Q4 11 Q1 12 Q2 12Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Customer base (left) Net sales (left) EBITDA (left) 29Customer net YoY net sales EBITDA intake (right) growth (right)margin (right) 30. The Kazakhstan mobile market overview MOBILE SUBSCRIBERS MARKET SHARENET ADDITIONSThousands of subscribers 1.8%7.7% 100% 2,000 80%1,500 60%1,000 40%500 20%00% -500Q3-Q4-Q1-Q2-Q3- Q4-Q1-Q2-2010 2010 2011 2011 20112011 2012 2012Tele2Kcell/ActivTele2Kcell/ActivDalacom/Pathword BeelineDalacom/Pathword Beeline30 31. Tele2 Kazakhstan forward-looking statementThe following assumptions should betaken into account when estimating theoperational performance of the totaloperations in Kazakhstan in 2012: Tele2 expects the subscriber base to reachup to 3.0 million (earlier 2.5-2.7) Tele2 expects an EBITDA contribution ofbetween SEK -350 to -400 Tele2 expects capex of betweenSEK 550-600 million. Tele2 expects to reach EBITDA break-evenby 2H 2013. Tele2 expects to reach a long-term mobilecustomer market share of 30 percent.31 32. Agenda About Q2 2012 Financial review Concluding remarks32 33. Group results SEK million Q2 2012Q2 2011 % YTD 2012YTD 2011FY 2011% Net sales 11,064 10,0789.8% 21,54519,72041,0019.3% EBITDA 2,7152,809-3.3% 5,286 5,35311,212-1.3%EBITDA margin (%)24.5%27.9% -3.3%24.5% 27.1%27.3%-2.6% Depreciation & associated companies -1,268 -1,015 24.9% -2,457-1,985 -4,15823.8%Depreciation of net sales (%) -11.5% -10.1% -1.4%-11.4%-10.1%-10.1%-1.3% One-off items-20-57-19 42-4 EBIT 1,4271,737 -17.8% 2,810 3,410 7,050 -17.6% Normalized EBIT1,4471,794 -19.3% 2,829 3,368 7,054 -16.0%Normalized EBIT margin (%) 13.1%17.8% -4.7%13.1% 17.1%17.2%-3.9% Financial items -321 -230 39.6% -499-304-674 64.1% Taxes -257 -399 -35.6%-593-772 -1,472-23.2% Net profit849 1,108 -23.4% 1,718 2,334 4,904 -26.4% Discontinued operations 15-80.0%1 -8 -7 -112.5% Net profit850 1,113 -23.6% 1,719 2,326 4,897 -26.1%33 34. Currency movements Q2 20123%2%1%0%-1%-2%-3% EUR RUB NOKAverage YTD Q2 2012 vs. YTD Q2 2011Fixing rate Jun 2012 vs. Dec 2011EUR/EUR pegged and RUB currencies represent 54%of external sales and 74% of EBITDA34 35. Depreciation DEPRECIATION and DEPRECIATION % OF NET SALESChange Y-on-Y for Q2SEK Million Acquisition of Network 1,50012.5% Norway (SEK 85 million)12.0% of which surplus depreciation and 1,200amortization of SEK 63 million11.5%11.0%900 Upgrade/replacement of10.5%networks in the Baltics during600 10.0% 2012 - 2013 (SEK 72 million)9.5%3009.0% Russia SEK 57 million0 8.5%Q211Q311 Q411 Q112 Q212 Kazakhstan SEK 22 millionDepreciationDepreciation of net sales (%)35 36. Financial items Financial items Q2 2012 Q2 2011 YTD 2012 YTD 2011 FY 2011 Interest income/costs-268 -87 -446 -128-483 Exchange rate differences, external 6 -33 -7-42 -24 Exchange rate differences, intragroup -11 -56 42-3913 Other financial items -48 -54-88-95-180 Total-321-230 -499 -304-67436 37. Taxes Taxes in income statement Q2 2012Q2 2011 YTD 2012 YTD 2011 FY 2011 Normal-257 -399-593 -772 -1,580 One off-- -- 108 Total -257 -399-593 -772 -1,472 Taxes in cash flow statementQ2 2012Q2 2011 YTD 2012 YTD 2011 FY 2011 Normal-112 -325-314 -550-948 One off-- --- Total -112 -325-314 -550-948 Deferred tax assets at year to date amounted to SEK 2.5 (Dec 2011: 3) billion The 2012 tax payment will affect the cash flow with SEK 1,000 (earlier 1,200)million37 38. Cash flow SEK million Q2 2012Q2 2011YTD 2012YTD 2011FY 2011 OPERATING ACTIVITIES Before paid tax 2,5482,6865,065 5,35010,895 Paid taxes -112 -325-314-550 -948 Change in working capital-246-7 -665-264 -257 CF from operating activities2,1902,3544,086 4,536 9,690 INVESTING ACTIVITIES CAPEX -1,417 -1,661-2,247-2,677 -5,572 CF after CAPEX7736931,839 1,859 4,118 Shares and other financial assets -5 -57-203-54 -1,563 CF after investing activities 7686361,636 1,805 2,55538 39. Proforma financial debt profile SOURCES OF FUNDING SEK Billion 20.016.9 17.5 15.012.812.1 12.5 10.07.55.02.50.0 -2.5Q4 11Q1 12 Q2 12Revolving credit facility Russia bondOther financingCommercial paperNorwegian bond Swedish BondOff BS itemsCash Proforma net debt39 40. Debt position and ratio PROFORMA NET DEBT / EBITDA 12M ROLLING SEK Billion / Ratio 20.02.00 17.51.75 Upper limit2.92.9 15.01.502.9 2.9 12.51.25 Lower limit16.9 10.01.0012.8 12.17.50.755.00.502.50.250.00.00.00.00Q4 11 Q1 12Q2 12Proforma Net DebtOrdinary dividend (paid May 2012)Extraordinary dividend (paid May 2012) Leverage Net40 41. Mobile Fixed broadbandFixed telephonyOther Group financials GROUP EBITDA and GROUP NET SALES Group EBITDA GROUP EBITDA MARGIN margin SEK Million SEK Million 4,00030% 12,00028% 3,000 9,00026% 2,000 6,00024% 1,000 3,00022% 020% 0 Q211 Q311 Q411 Q112Q212Q211Q311Q411 Q112 Q212GROUP CAPEX (BS) and CAPEX/SALESROCE (NORMALISED)SEK MillionCAPEX/Sales Percent 2,00030% 25% 19%20%21%22% 1,50023%19%16% 16%15% 1,00015%10% 5008% 5% 00% 0% Q211 Q311 Q411 Q112Q212 Q1 Q2 Q3 Q4Q1 Q241 42. Agenda About Q2 2012 Financial review Concluding remarks42 43. Concluding remarksManage the shift from voice to data Package services to increase attractiveness ofdata Exploit 4G services to make it a commercialsuccessExploit new services and opportunities byoffering our customers what they needfor less WyWallet +46 app Roaming bucketsGrowth Through emerging markets such as Russia andKazakhstan Through evolution of multiple devices43 44. Q&A44 45. 45