CEO WORD Q4 2015


"The fourth quarter marked the end of a very eventful year, and further evidence of our challenger spirit in our pursuit to be the champion of customer value in mobile connectivity. We launched our nationwide 4G only network, the world’s first, in the Netherlands as well as completed the agreement to combine our mobile business with Kazakhtelecom’s."

Mobile end-user service revenue showed good progress, up 2 percent year on year (5 percent on a constant currency basis). Group EBITDA declined 5 percent, as anticipated, as a result of our accelerated launch in the Netherlands and devaluation in Kazakhstan.

In Sweden, leveraging our dual brand strategy and Tele2.0, we have changed industry practices profoundly in terms of offering flexibility, transparency and simplicity (alongside providing a great network experience). We see loyal customers reflected in lower churn, lower SAC, hence EBITDA growth of 8 percent. Our customer focused strategy resulted in us winning both no. 1 and no. 2 awards for most satisfied customers in Swedish telecoms in the Swedish Quality Index award. We continue to see the Baltic region delivering on the back of this year’s extensive 4G network roll-out. Demand for data services surged coupled with our competitive pricing and higher smartphone sales favorably impacting revenue and driving mobile end-user service revenue up by 8 percent in Lithuania, and 10 percent in Estonia.

In mid-November we officially launched Tele2’s 4G network in the Netherlands having achieved 95 percent outdoor population coverage. We are offering Dutch consumers a high quality, high speed 4G user experience and new 4G data centric subscriptions in both the B2B and B2C markets at competitive price levels. Increased competition pre-Christmas, especially at the low-end sim-only segment resulted in a lower level of net intake than expected. To be clear however our priority is to attract 4G data hungry customers to our brand. Brand awareness and consideration has improved since launch, serving us well in rebuilding the brand in the Dutch market going forward. We will continue to invest significantly in this business in 2016 as we further establish ourselves as the preeminent challenger in the Netherlands.

In Kazakhstan, we have added 1.1 million mobile customers this year, with positive intake in the quarter, despite intensified competition, enabling another quarter of double digit mobile end-user service revenue growth (excluding FX). Exchange rate effects due to the significant devaluation of the Kazakh Tenge have impacted our SEK reported progress. We are delighted to announce that all regulatory approvals have now been received and we are on track to close the transaction with Kazakhtelecom in the current quarter. This joint venture creates a more sustainable and significant player in the market whilst de-risking our investment.

The Challenger program is showing good progress with a number of new initiatives being executed and we are on track to achieve the SEK 1 bn in benefits that we set out to deliver by 2018. Our Shared Operations organization expanded in both Chennai, India and Riga, Latvia, in the quarter.

This morning I announced some changes in my leadership team as we embark on the next stage of our data monetization journey. We are delighted to have recruited a new telco experienced Group CFO and have new CEOs in Sweden and Netherlands, both promoted from within the Tele2 talent pool. I would like to take a moment to thank both Thomas and Jeff for their many valuable contributions to Tele2 over the years and wish them my very best wishes in their future adventures.

Looking forward and with our new leadership team in place, we remain single mindedly focused on further data monetization across our footprint. Rolling out and commercialising the benefits of 4G, most markedly in the Netherlands will impact overall progress for the Group in 2016. Our guidance reflects this important investment which will deliver long term value for our business, our employees and our shareholders.

 

Allison Kirkby
President and CEO