FIRST QUARTER 2017 April 24, 2017 Tele2 AB
Group highlights Q1 2017 SEK billion Q1 2017 % Change Reported % Change LFL Mobile end-user service revenue 3.7 +19% +10% Net sales 7.9 +22% +3% EBITDA 1.7 +41% +28% 2 LFL is constant currencies and pro forma for Altel and TDC Sweden
Tele2 s Way2Win Our Purpose We fearlessly liberate people to live a more connected life Where We Play How We Win Baltic Sea Challenger Investment Markets IoT Cash Generators Positively Fearless Brands Connecting Things our Customers Love Digital First Customer Experience Challenger Cost Structure Responsible Challenger Winning People & Culture 3
Delivering on our long term strategy Baltic Sea Challenger Investment Markets Challenger Cost Structure Winning People & Culture Sweden mobile end-user service revenue up 5% and Baltics up 12% Sweden EBITDA up 10% and Baltics up 16% Operating cash flow grew by 16% in Sweden and Baltics Netherlands mobile end-user service revenue up 40% Dutch data and voice on-loading at 87% and 40% respectively Kazakhstan mobile end-user service revenue up 14% Kazakhstan JV delivering EBITDA margin of 19% First TDC synergies materializing Challenger program well on track for SEK 1 billion per annum benefits TDC Sweden now co-located with Tele2 Jon James appointed CEO of Tele2 Netherlands 4 LFL is constant currencies and pro forma for Altel and TDC Sweden Operating cash flow is EBITDA CAPEX, 12 m rolling
Baltic Sea Challenger
Sweden Financials Net sales, LFL Mobile end-user service revenue, LFL EBITDA and EBITDA margin, LFL 0% +5% +10% 3 935 3 877 3 900 TDC 3 053 3 018 3 095 4 332 4 029 3 932 1 831 1 865 1 969 1 959 1 758 1 778 1 885 1 928 1 872 1 922 1 200 700 200 993 927 894 846 25% 24% 1 191 1 068 31% 1 045 1 091 1 028 28% 24% 50% 45% 40% 35% 30% 25% 20% -300 15% 10% 5% Q1 Highlights Net sales flat as strong mobile growth is offset by a decline in fixed business Mobile end-user service revenue growth driven by prepaid to postpaid migration, larger data buckets and growth in large enterprise Modest sales and marketing activities in the quarter, ahead of the launch of new Tele2 commercial proposition in Q2 EBITDA growth driven by higher service revenues, lower expansion costs, benefits from Challenger Program as well as TDC synergies -800 0% 6 LFL is pro forma for TDC Sweden
Sweden Consumer Momentum continues Consumer mobile end-user service revenue +5% Share of postpaid sales with bundle >3GB Customer satisfaction (Tele2 Media & Insight) 69% 87% 86% 78% 84% 51% Q1 16 Q1 17 Q1 16 Q1 17 Q1 16 Q1 17 Tele2 Comviq Q1 Highlights Consumer mobile end-user service revenue up 5%, driven by 12% growth in consumer postpaid due to migration to higher ASPU products Tele2 and Comviq customers increasingly taking larger data buckets Strong trend in Comviq customer satisfaction, while Tele2 is stable New Tele2 commercial propositions launched on April 21 st 7
Sweden B2B Synergies materializing B2B net sales, LFL B2B Large net sales, LFL Integration synergies +1% +3% SEK 19 million Q1 16 Q1 17 Q1 16 Q1 17 0 Q1 17 Q1 Highlights B2B sales stable in both Tele2 Business segment and former TDC Sweden B2B Large net sales up due to 8% growth of mobile end-user service revenue, partly offset by lower fixed telephony First TDC synergies materializing, mainly driven by migration of the MVNO traffic, which is to be finalized during Q2 8
Baltics Financials Net sales Mobile end-user service revenue EBITDA and EBITDA margin +12% +12% +16% 1 000 900 800 700 600 500 400 300 770 787 884 935 859 600 500 400 300 200 468 477 521 533 522 350 300 250 200 150 100 246 256 287 32% 33% 32% 264 28% 286 33% 60% 50% 40% 30% 20% 200 100 100 50 10% 0 0 0 0% Q1 Highlights Net sales growth driven by increase in both mobile end-user service revenue and equipment sales Mobile end-user service revenue growth continues due to prepaid to postpaid migration, data monetization and growth in mobile broadband Strong EBITDA performance driven by higher service revenue and Challenger Program benefits 9
Baltics Data monetization continues ASPU development Share of 4G capable smartphones in base MBB end-user service revenue +9% +52% 39% 24% Q1 16 Q1 17 Q1 16 Q1 17 Q1 16 Q1 17 Q1 Highlights Strong ASPU growth driven by increasing postpaid share and migration to larger buckets Continued strong increase in smartphone penetration, with room for further growth Mobile broadband growth as a result of investments in previous quarters 10
Investment Markets
Netherlands Financials Net sales Mobile end-user service revenue EBITDA +9% 587% +40% 1 800 1 600 1 400 1 200 1 000 800 600 1 441 1 452 1 478 1 583 1 577 500 450 400 350 300 250 200 150 322 336 419 438 451 200 150 100 151 400 200 100 50 50 0 0 0-50 -31-2 -23-100 12 Q1 Highlights Net sales up due to strong mobile momentum, partly offset by continued decline in fixed broadband and telephony Mobile end-user service revenue increase driven by >20% increase in customer base and ASPU growth of >10% EBITDA positively impacted by higher mobile service revenues, lower mobile expansion costs and reduction in NRA costs Improved cash contribution from fixed broadband driven by a disciplined investment focus Non-recurring item of SEK 95 million compared to SEK 73 million in Q1 2016-150 -116
Netherlands Momentum despite pressure Spontaneous brand awareness & brand consideration (Memo2) Share of total new postpaid (GfK) Usage on own network 34% 41% 42% 52% 20% 17% 0% 57% 40% 87% Q1 16 Q1 17 Feb 16 Feb 17 Mar 16 Mar 17 Awareness Consideration Voice Data Q1 Highlights Maintaining a decent market share of new postpaid contracts, despite increased price competition Good progress in data on-loading driven by network rollout at 99.5% outdoor and 91% indoor population coverage 403k active VoLTE customers following iphone activation at the end of January Mobile net intake of 16k, including a -24k one-time clean-up 13
Kazakhstan Financials Net sales, LFL +14% Mobile end-user service revenue, LFL +14% EBITDA and EBITDA margin, LFL +713% 800 700 600 500 400 300 200 100 569 600 639 734 649 600 500 400 300 200 100 433 449 474 488 495 170 120 70 20 3% 15 8% 50 14% 13% 89 97 19% 122 20% 10% 0% -10% -20% -30% 0 0-30 -40% -50% Q1 Highlights Net sales up due to strong mobile momentum Mobile end-user service revenue growth driven by increased customer base and higher ASPU Positive EBITDA development driven by revenue growth, improved operating leverage and JV synergies 14 LFL is constant currency and pro forma for Altel
Kazakhstan Continued strong performance Customer base, LFL (thousands) ASPU development, LFL Integration +3% +9% 6 298 6 514 Q1 16 Q1 17 Q1 16 Q1 17 ~630 sites merged Q1 Highlights Customer base continues to grow year-on-year Strong ASPU driven by continued focus on improving data monetization ~630 base station sites merged as network integration continues throughout 2017 15 LFL is pro forma for Altel
Challenger program on track Simplify % of products harmonized on shared platforms Discipline % of spend strategically sourced & procured Baseline 2016 actual 2018 target 30% 40% 60% 40% 75% 80% Key progress areas since inception New revenue streams Sales & marketing efficiency Network & IT consolidation Consolidate % of reduction in IT OpEx as share of revenue Transform % of staff in Shared Operations 0% 5% 20% 12% 18% 25% Customer service optimization Procurement scope increase Administration efficiency 16
Financial Overview
Mobile end-user service revenue Tele2 Group Development per market +19% 3 129 3 307 3 598 3 711 3 725 164 54 129 230 0 19 3 725 3 129 Q1 16 Sweden Baltics NL KZ RoW Oth Q1 17 18
60,0% 50,0% 40,0% 30,0% 20,0% 10,0% 0,0% EBITDA Tele2 Group Development per market 1900 1700 1500 +41% 1 562 1 459 1 723 1 900 1 700 1 500 197 40 182 116 3-41 1 723 1300 1100 1 226 1 087 1 300 1 226 1 100 900 700 500 19,0% 16,3% 22,4% 17,8% 21,9% 900 700 300 100 500 Q1 16 Sweden Baltics NL KZ RoW Oth Q1 17 EBITDA margin 19
60,0% 50,0% 40,0% 30,0% 20,0% 10,0% 0,0% CAPEX Tele2 Group Development per market -46% 1400 1 400 1200 1000 800 600 1 154 820 779 1 078 627 1 200 1 000 800 600 1 154-79 -136-288 50-47 -27 627 400 200 17,9% 12,3% 11,2% 13,1% 8,0% 400 200 0 0 Q1 16 Sweden Baltics NL KZ RoW Oth Q1 17 CAPEX / Net sales 20
Free cash flow Total operations Tele2 Group Development 900 +216% 838 600 Q1 16 EBITDA Interest etc Taxes Working capital CAPEX One-off items Q1 17 700 500 300 139 394 178 500 400 300 200 100 497 41-39 260-70 178 100-100 -300 Q1 16 Q3 15 Q2 16-154 Q1 16 Q3 16 Q4 16 Q1 17 0-100 -200-154 -357-300 -500 21 Free cash flow = Cash flow from operating activities and CAPEX paid
Operating cash flow EBITDA less CAPEX 12 m rolling, SEK million 3 491 3 456 3 423 3 470 3 335 3 402 3 432 3 437 3 871-1 178-1 504-1 625-1 940-2 223-2 282-2 196-1 934-1 344 Q1 15 Q2 15 Q3 15 Q4 15 Baltic Sea Challenger & Rest of Group Investment Markets 22
Debt position and financial leverage Economic net debt to EBITDA 12 m rolling SEK billion Leverage 2,5 12,5 10,0 2,6 2,6 1,88 1,75 2,0 7,5 1,5 5,0 9,4 11,7 11,0 10,4 10,3 1,0 2,5 0,5 0,0 Mar 2016 Jun 2016 Sep 2016 Dec 2016 Mar 2017 0,0 Economic net debt Dividend, announced Economic net debt to EBITDA 23 Economic net debt excludes liabilities related to Kazakhstan
Financial guidance 2017 - Reconfirmed Mobile end-user service revenue Net sales (SEK billion) Mid-single digit % growth* 31 32 EBITDA (SEK billion) 5.9 6.2 CAPEX (SEK billion) 3.8 4.1 24 * Based on LFL which is constant currencies and pro forma for Altel and TDC Sweden
Summary
Key priorities moving forward Become the customer champion of connectivity Growth from continued data monetization, despite RLAH Sustain momentum in Sweden and Baltics Further leverage our challenger strategy in Netherlands and Kazakhstan Execute on Challenger and synergy programs Positively Fearless Brands Connecting Things our Customers Love Digital First Customer Experience Challenger Cost Structure 26
Tele2 s Way2Win Our Purpose We fearlessly liberate people to live a more connected life Where We Play How We Win Baltic Sea Challenger Investment Markets IoT Cash Generators Positively Fearless Brands Connecting Things our Customers Love Digital First Customer Experience Challenger Cost Structure Responsible Challenger Winning People & Culture 27
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