CEO WORD q4 2016

The fourth quarter concludes a year with increasingly strong mobile momentum driven by 4G data monetization across the Group. Within our established markets, we are seeing positive growth trends supported by our challenger brand positioning and customer value proposition in both residential and business segments. Now with the closing of the acquisition of TDC Sweden we will accelerate and strengthen our B2B strategy further in our most important market. In the Netherlands and Kazakhstan, we are seeing customers respond positively to our challenger strategy as we start to realize our growth ambitions in these markets.

On a like for like basis, Group mobile end-user service increased by 6 percent in the quarter and we returned to EBITDA growth, up 4 percent, despite continued investment in the Netherlands. We did however recognize a net loss in the quarter mainly as a result of restructuring and integration costs.

In Sweden, we have had a strong and eventful fourth quarter. The integration of TDC Sweden is already underway and progressing well with a number of key contracts retained. We set into motion our new “Be content with more!” marketing campaign to strengthen the Tele2 brand. Tele2 customers continue to shift towards higher data buckets, while Comviq continues the transition from prepaid to postpaid with strong postpaid growth in the quarter. EBITDA was up 9 percent through the quarter on the back of 7 percent growth in mobile end-user service revenue. Excluding the positive contribution from TDC, EBITDA was flat as strong mobile end-user service revenue growth of 4 percent was offset by higher marketing spend compared to a seasonally low investment in Q4 2015. Our customers are delighted with our network quality, and now that coverage is at 89 percent, we are providing an even better user experience in rural Sweden.

The Baltics region showed significant mobile end-user service revenue growth of 12 percent driven by the ongoing shift from prepaid to postpaid and increased demand for data. EBITDA is up 3 percent as we invested in Lithuania to target higher ASPU mobile broadband subscribers and grow our customer base. Latvia and Estonia continue to outperform with strong EBITDA growth. 4G population coverage reached 99 percent by the end of the year, thus strengthening the foundation for further future data monetization.

This quarter marks the anniversary of the launch of our 4G-only network in the Netherlands. We are pleased with the progress made to date, doubling the number of 4G customers as our data centric offering and “Fun Rebel” positioning continues to support 4G data monetization and growth. Mobile end-user service revenue was up 9 percent. Adjusting for a significant VAT benefit in Q4 2015, the increase was 40 percent fueled by an increasing customer base as well as ASPU improvement. We have seen good progress on the network rollout with indoor population coverage reaching 90 percent.

Despite an intense competitive environment, we have increased our customer base by continuing to invest in a disciplined manner and by truly leveraging our customer champion strategy.

In Kazakhstan, we achieved our 2016 integration milestones as we upgraded a number of base stations to LTE and merged many of our co-located sites with Altel. We continue to experience strong topline momentum and have added more than 250,000 mobile customers this year with a positive net intake of 56,000 customers during the quarter. Kazakhstan has become a material contributor to Group EBITDA as we continue to realize synergies and improve margins. We will continue to build on this great platform as we look to complete the integration of Altel in 2017.

The Challenger program is ahead of its plan to deliver SEK 1bn of annual benefits by 2018. Since inception, we have already realized SEK 600 million in annual benefits. The initiatives which were launched in previous quarters are continuing to materialize.

To conclude, I am immensely proud of the whole Tele2 team and the continuing momentum we are seeing across our footprint. Looking forward we remain single mindedly focused on data monetization in both our established and investment markets. 2017 will see continued disciplined investment in both our Dutch mobile business and in the ramp-up of the integration of TDC Sweden. Our guidance and revised dividend policy reflect the evolving nature of the Group and the confidence we have in the delivery of long term value creation for our shareholders, customers and employees.


Allison Kirkby
President and CEO