Financial health

Tele2’s financial performance is a function of a continued focus on mobile services on our own infrastructure, complemented in some countries by fixed broadband services and business to business offerings. Mobile sales, which continued to grow compared to the same period last year, and a greater focus on mobile services on own infrastructure have led to a prolonged expansion in the EBITDA margin. The decline in the fixed telephony customer base is expected to persist. The company will work on maximizing the return from fixed-line operations.

Comments below relate to Tele2’s continuing operations unless otherwise stated.

Net customer intake

In 2009, the total customer base increased to 26,579,000 (24,018,000). Net customer intake, excluding acquired and divested companies was 2,327,000 customers compared with 1,141,000 customers the previous year. The customer intake in mobile services increased by 32 percent to 3,139,000 (2,372,000), of which 142,000 (88,000) were mobile internet users. The good intake in mobile services resulted from a solid performance mainly in Tele2 Russia and Tele2 Sweden. In 2009, Tele2 Russia launched 18 new regions resulting in a total customer intake of 2,947,000 (1,858,000) of which 1,898,000 (103,000) were derived from new operations. Fixed broadband lost –11,000 (71,000) customers in 2009, mainly due to less emphasis on market share and a larger focus on profitability throughout the Tele2 footprint. Fixed telephony had an expected outflow of customers during the year.

Net sales

Tele2’s net sales amounted to SEK 39,265 (38,272) million. The positive revenue development was driven by good trends in core mobile services and fixed broadband services.

EBITDA

EBITDA was SEK 9,185 (8,169) million, with an EBITDA margin of 23.4 (21.3) percent. The EBITDA developments was positively affected by strong operational development in fixed broadband services and to some extent hampered by an increased push in mobile marketing spend with an emphasis on the roll-out of new regions in Russia.

EBIT

Operating profit/loss, EBIT, was SEK 5,527 (2,848) million, which includes impairment losses and other one-off items of SEK –11 (–1,642) million. The EBIT margin amounted to 14.1 (7.4) percent.

Profit/loss before tax

Net interest expense and other financial items totalled SEK –500 (–1,013) million. Exchange differences of SEK –77 (–550) million were reported under other financial items. The average interest rate on outstanding liabilities was 6.9 (6.2) percent. Profit/loss after financial items, EBT, amounted to SEK 5,027 (1,835) million.

Net profit/loss

Profit/loss after tax was SEK 4,601 (1,715) million. Earnings per share amounted to SEK 10.35 (3.81) after dilution. Tax on profit/loss for the year was SEK –426 (–120) million.

Cash flow

Cash flow from operating activities, including discontinued operations, amounted to SEK 9,118 (7,896) million and cash flow after CAPEX amounted to SEK 4,778 (3,288) million.

CAPEX

During 2009, Tele2 made investments of SEK 4,439 (4,481) million in tangible assets and intangible assets (CAPEX), mainly driven by expansion in Russia.

Net debt

Net debt amounted to SEK 2,171 (4,952) million at December 31, 2009, or 0.2 times EBITDA in 2009. Including guarantees to joint ventures, the net debt to EBITDA in 2009 amounted to 0.4 times. Tele2’s available liquidity amounted to SEK 12,410 (17,248) million.

Financial targets

Tele2’s financial position is strong thanks to the successful realignment of the company. The net debt (including guarantees to joint ventures) to EBITDA is today 0,4 times, which puts us in a very solid position compared to our peers. Due to a generally difficult economic environment, Tele2 has decided to continue to keep a conservative view on its balance sheet.

Tele2 also need to take into consideration that the increasing emerging markets footprint, leads to greater operational risks. Hence, Tele2's longer term financial leverage defined as net debt/EBITDA ratio should be in line with the industry and the markets in which we operate and reflect the status of our operations and future strategic opportunities.

EBITDA margin

The EBITDA hurdle for a core business is maintained at 20 percent. Mobile on own infrastructure should target 35 percent or better.

ROCE

The Return on Capital Employed (ROCE) shall for the group, longer term, reach 20 percent. To be able to meet the demanding target, Tele2 need to accomplish its goal to become an infrastructure based operator, focusing mainly on mobile services. In 2009, ROCE adjusted for one off items was 17 (16) percent.